The Child Care and Development Fund (CCDF) is the main source of federal funding dedicated primarily to child care subsidies for low-income working families. The term CCDF was coined by the U.S. Department of Health and Human Services (HHS) in regulations issued after the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193) made major changes to federal child care programs. This report is one in a series of CRS reports focused on PRWORA in light of the upcoming 30-year anniversary of its enactment. Prior to PRWORA, four separate federal programs supported child care for low-income families: (1) Aid to Families with Dependent Children (AFDC) Child Care provided open-ended mandatory appropriations to support child care for AFDC recipients (i.e., cash aid recipients) who needed it in order to work or participate in certain activities, (2) Transitional Child Care provided open-ended mandatory appropriations to support child care for up to 12-months for families transitioning off AFDC assistance, (3) At-Risk Child Care provided capped mandatory appropriations to support child care for those considered at risk of needing AFDC assistance, and (4) the Child Care and Development Block Grant (CCDBG) provided discretionary appropriations to support child care for low-income working families not associated with AFDC. In 1996, PRWORA simultaneously repealed, created, and consolidated federal child care programs. The law eliminated AFDC and the three AFDC-related child care programs, substantially amended and reauthorized the CCDBG Act, and established a new block grant of mandatory funding under Section 418 of the Social Security Act, the Child Care Entitlement to States (CCES). The law underpinning the CCES generally called for these new mandatory funds to be combined with discretionary CCDBG funds at the state level and to be spent according to CCDBG rules. In addition, PRWORA authorized states to augment CCDBG appropriations, at their option, with transfers from the newly created Temporary Assistance for Needy Families (TANF) block grant. Like the CCES, TANF transfers were to be subject to CCDBG Act rules. Combined, these federal funding streams (CCDBG, CCES, and TANF transfers) are commonly referred to as the CCDF. The child care provisions in PRWORA were designed to achieve several purposes. As a component of broader AFDC reform, they were intended to support an overall goal of promoting self-sufficiency through work. In addition, PRWORA attempted to address concerns about the effectiveness and efficiency of federal child care programs by streamlining the federal role, reducing the number of programs with conflicting rules, and increasing the flexibility provided to states. The result was to be a consolidated program that would simplify delivery and administration at the state and federal levels. Federal Child Care Funding Before and After PRWORA / Source: Data are generally from the U.S. Department of Health and Human Services, adjusted for inflation (CPI-U). Amounts exclude supplementals or other one-time funding. Federal funding for the CCDF generally grew in the early years after the enactment of PRWORA (see the figure). Total federal funds initially peaked in FY2002, before trending downward in constant terms for more than a decade. While CCES appropriations and TANF transfers have largely continued a downward trend, this has not been the case for the CCDBG. A large increase in CCDBG appropriations in FY2018 was followed by subsequent increases, driving the recent upward trend in overall CCDF funding. This represents a marked shift from the early years: initially, the CCDBG accounted for less than one-third of federal CCDF funds, whereas in more recent years, the CCDBG has accounted for nearly two-thirds of federal CCDF funds. In addition to federal funds, the CCES is also supported with nonfederal match and maintenance-of-effort. Separately, outside of the CCDF, some states opt to spend federal and nonfederal TANF funds on child care directly in state TANF programs. Unlike TANF transfers to the CCDF, such expenditures are not subject to CCDF program rules. Over time, these so-called TANF-direct child care expenditures have raised questions about the relative merits of maximizing state flexibility, streamlining program rules, and ensuring the same standard of care across federal programs. Similar questions exist about the optimal level of federal investments in child care overall, given concerns about the supply and affordability of child care, as well as the relatively low share of eligible children served by the CCDF (15% in 2023).
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