Vice President Kamala Harris said in a video Thursday that the Biden administration would cap child care costs for families participating in the  the Child Care and Development Block Grant program at 7%.

Vice President Kamala Harris said in a video Thursday that the Biden administration would cap child care costs for families participating in the the Child Care and Development Block Grant program at 7%. alvarez via GettyImages

White House beefs up child care block grants

A new rule caps the total amount low-income families have to pay for child care at 7% of their income and directs states to pay child care providers more fairly and on time.

Child care is expensive. It costs a family nearly $11,000 a year per child, an expense that can strain family budgets and limit employment options for parents.

For low-income families, the price is especially burdensome. They pay as much as 30% of their income on child care. But under a new federal rule announced Thursday, the White House is hoping to reduce the financial strain for many of these families by strengthening the Child Care and Development Block Grant, or CCDBG, program.

“I am proud to announce that President Joe Biden and I are lowering the cost of child care for more than 100,000 working families who receive federal child care assistance,” Vice President Kamala Harris said in a video posted on X. “For these families, we will cap the total amount you have to pay at 7% of your income, which will save you on average $200 a month.”

The CCDBG program, which supports more than a million children, sends funds to states to use to lower the cost of care for families and raise child care provider wages, among other things. Every state participates in the program.

The move comes as child care costs in the U.S. have increased more than 30% since 2019. Inflation has driven up child care costs, while a loss in federal funding is also taking a toll. During the pandemic, the federal government invested more than $52 billion to help keep child care providers in business and ensure that low-income families could still access care. But the majority of those subsidies have ended.

In addition to capping child care costs for participating families to no more than 7% of their income, the new rule also encourages states to go further and make child care completely free for families at or below 150% of the federal poverty level and for those with disabled, homeless or foster children. The Department of Health and Human Services has “long encouraged” states to set copayments at or below 7%, but only 18 states do so, according to the White House. 

Capping copayments for CCDBG families will save a North Carolina family of three earning $44,000 close to $110 per month, for instance. In Wisconsin, the same size family earning $68,000 could save as much as $635 per month.

The approximately 140,000 child care providers with CCDBG families as clients will also get more financial stability as a result of the new policy. The rule requires all states to pay home-based and center-based CCDBG providers on-time, which will make it easier for providers to hire necessary staff. It will also pay providers based on enrollment, rather than attendance. Advocates argue that attendance-based payment structures disincentivize providers from taking low-income families, who may have inconsistent attendance due to work stoppages, transportation or other reasons.

Currently, only eight states pay CCDBG child care providers on-time, and only half of states pay those providers based on enrollment. 

The new rule also encourages states to create and accept online enrollment applications. The reasoning is that this would make it easier for families to access CCDBG subsidies. ”Some families currently face barriers in accessing CCDBG because of challenging enrollment processes and paperwork burdens,” according to the White House. “For instance, in nearly one-third of states, families still use paper applications to access child care assistance.” 

With the finalized rule, states are also encouraged to adopt a policy of presumptive eligibility for child care subsidies, which would allow families to receive temporary financial child care assistance while the state verifies their eligibility. This change will considerably lower the burden for families to receive the subsidy, particularly for those experiencing homelessness. 

Only six states offer presumptive eligibility to families, and 37 have a policy for online enrollment.

“I strongly believe that when we lift up the status and the economic status of families, we lift up the economic status of communities, our entire economy, and our entire nation benefits as a result,” Harris said back when the rule was first proposed in July.