A new report from an Iowa City based research organization claims low-wage working parents in the state would be better served if reforms were made to Iowa’s Child Care Assistance program. Iowa Policy Project (IPP) Research Director Peter Fisher says Iowa’s eligibility ceiling for participation in the program is 145 percent of the federal poverty guideline. “There are only seven states that have a lower ceiling than Iowa. Thirty states have a ceiling of 165 percent or higher and quite a few states are at 200 percent of poverty, so we’re well below the norm,” Fisher says.
Current rules provide a disincentive to families to earn more money, according to Fisher, because the loss of child care assistance can outweigh the increased income. “A single parent with one child, under the current program, is going to lose $4,890 in benefits when they hit that ceiling. A married couple, both working, with two children in child care will lose almost $9,000,” Fisher said. “That’s a pretty big hit and it happens all at once.”
Fisher suggests lawmakers look at ways to reduce what has become a “financial cliff” for families, where the more they make, the further they fall behind because of the staggering cost of child care. “There are other programs, the Earned Income Tax Credit and food assistance, where you don’t see a cliff. The reason is they do what we’re recommending here, which is tapering the benefits gradually, rather than cutting them all off at once,” Fisher said.
Part of the problem, according to Fisher, is that federal poverty guidelines do not take into account the cost of childcare, which can become a severe strain on family budgets. The analysis recommends a graduated pay rate based on income, or raising the amount a working parent can make and still qualify for Child Care Assistance.
Iowa’s Child Care Assistance program serves about 23,000 children each month.