HB 89-DAY CARE ASSIST./CHILD CARE GRANT PROGRAM  3:03:13 PM CHAIR PRAX announced that the first order of business would be HOUSE BILL NO. 89, "An Act relating to the day care assistance program and the child care grant program; and providing for an effective date." 3:03:40 PM REPRESENTATIVE JULIE COULOMBE, Alaska State Legislature, as prime sponsor, gave a brief introduction to HB 89. She stated that there are two ways HB 89 would strengthen the child care system. It would expand the number of families who can afford child care by making subsidies more inclusive, and it would align the subsidy level to reflect the actual cost of care. After meeting with state departments and trade organizations, she expressed the understanding that the hiring crisis is contributing to the unavailability of daycare, but there are many other factors, including the billing requirements on daycare centers. The result of this is the cost of care is not covered, and daycare centers are going out of business. She added that the COVID-19 pandemic contributed to this. She stated that while other solutions exist, HB 89 would address the accessibility problem. The proposed legislation would do this by increasing the number of families who could access the vouchers and the number of vouchers available. Connected to this, she said, there is a study which would investigate the actual cost of care, not the current market's cost. She stated that she would put forth an amendment to cover the cost of the study. 3:07:18 PM DANIEL ROBBINS, Staff, Representative Julie Coulombe, Alaska State Legislature, on behalf of the prime sponsor, Representative Coulombe, presented a PowerPoint on HB 89 [hard copy included in the committee packet]. He began on slide 2 and stated that the proposed legislation would address the lack of affordable quality child care in the state, which has contributed to the following: labor shortages, endangerment of children, economic insecurity of families, and the decrease in workforce participation. He pointed out the proposed legislation would strengthen the child care sector by improving access for families, which in turn would send parents back into the workforce, as seen on slide 3. In reference to the next slide, he said, HB 89 would align the subsidy level to reflect the actual cost of care, which would strengthen the child care system by expanding the number of families who could utilize daycare vouchers. He pointed out on slide 5 that the child care crisis is a result of low wages, labor shortages, and declining numbers of child care providers. He continued that the decrease in labor force participation equates to worker shortages, as seen in the graph on slide 6. The graph relates that Alaska's child care workforce decreased 20 percent between 2018 and 2020. MR. ROBBINS pointed to slide 7 which related that child care subsidies are inadequate and do not reflect the actual cost of care. He explained that providers lose money when they offer care to low-income families on subsidies; however, this does not affect only low-income families. To compensate, providers raise rates, affecting middle-class families who are ineligible for subsidies. In turn, many middle-class families cannot afford child care; therefore, a parent would need to stay home to care for children. He moved to slide 8 which addressed the eligibility for subsidies. He stated that the threshold to receive subsidies for one earner is 85 percent of the state median income, or $60,144. He noted that the federal poverty line in Alaska for a two-person household is $24,640, which means the current eligibility threshold is 244 percent of the federal poverty line. He reasoned that this leaves most of the middle class without affordable care, which results in severe labor shortages across the state. The proposed legislation would raise the eligibility threshold to 300 percent of the federal poverty line, or $73,920. He stated that the level of subsidy would be scaled by the Department of Health (DOH) based on need. He stated that the result would be an expanded number of families who could afford care, and this would allow more Alaskans to reenter the workforce. 3:11:10 PM MR. ROBBINS, continuing to slide 9, pointed out the subsidy for child care is currently based on a market rate survey. He stated that this underestimates the cost of care, which puts providers at financial risk. He explained that because of inadequate subsidies for low-income families, providers are forced to raise rates, pricing some families out of child care. He stated that the proposed legislation would align subsidy rates with the actual cost of care, improving financial stability for providers and affordability for middle-class families. He expressed the opinion that a family with a household income of $60,000 per year should not spend more than $4,200 per year on child care costs. He compared this with $6,600 per year now being spent. Referring to slide 11, he pointed out that parents are moving to part time employment or leaving work altogether. In other words, child care issues affect parents' employment. He pointed out on slide 12 a case study in Missouri where the state has introduced new programs with tax credits which would go directly to employers and the child care industry. MR. ROBBINS moved to slide 13, pointing out the case study in North Dakota which looks at a solution to the child care issue by addressing affordability, availability, and quality. He said North Dakota has already spent over $70 million on the program. Recapping the solution in the proposed legislation, he said the number of families who are eligible for child care subsidies under the Child Care Assistance Program (CCAP) would be expanded, making child care more affordable, which would help parents return to the workforce. 3:14:19 PM MR. ROBBINS proceeded to the sectional analysis on HB 89 [copy included in the committee packet], which read as follows [original punctuation provided]: Section 1: Amends AS 47.25.001(a)[2] to increase the maximum income threshold for state subsidies for child care to 300% of federal poverty line for the state. Section 2: Amends AS 47.25.071(c) to calculate the true cost of providing child care in the state of Alaska, and allows the grant program to fund disbursements to beneficiaries at that amount. Section 3: Adds a new section to make a conforming change to the federal reporting provisions for the child care assistance program. Section 4: This is a conditional clause that gives the United States Department of Health and Human Services the authority to approve additional amendments to the state plan for day care assistance or determine that those amendments are not necessary. Section 5: This is an effective date clause setting the effective date on the day after the date the United States Department of Health and Human Services approves the corresponding amendment to the state plan or determines that approval is not necessary. 3:16:14 PM BLUE SHIBLER, Executive Director, Southeast Alaska Association of the Education of Young Children (AEYC), expressed gratitude for HB 89 and offered her support. She shared that AEYC is a nonprofit organization which provides child care referral services throughout Southeast Alaska. She shared that she is a former owner of a child care center. She stated that throughout her career she has engaged with families and watched parents struggle to afford child care. The families who receive child care assistance often cannot afford to pay the difference between the subsidy and the actual tuition fee. She expressed the belief that the proposed legislation would help close this gap and allow more families access to quality child care in Alaska. She expressed the concern that wages for child care workers should also be addressed, otherwise the state is expanding access to a system which is "about to crumble." In addition to being the director of AEYC, she stated that she also represents a coalition of healthcare providers and parents. She stated that this group has recommended the funds from CCAP be used directly for wage stipends. She expressed the opinion that increasing access to child care for families should be done at the same time as increasing pay for child care providers. 3:19:18 PM JEN GRIFFIS, Public Policy Manager, thread, voiced support for HB 89. She stated that thread is a statewide nonprofit which provides professional development for child care providers, supports programs, and helps connect parents to resources. She stated that finding affordable child care is becoming more difficult because early educators are leaving the workforce and child care programs are closing. She expressed the opinion that the unavailability of child care is having an impact on the workforce and economy. She stated that historically the gap between availability and need for child care in Alaska has been around 25 percent. Various programs and communities have reported declines in enrolment capacity to 40-60 percent, and this is attributed to workforce shortages in child care. She stated that federal stabilization funds provided during the COVID-19 pandemic helped support child care providers, but the third and final phase of funds have just been distributed. Data on the impact of the second phase of funds has been gathered and will be shared within the coming weeks. The preliminary analysis of the data demonstrates that the $50 million in stabilization funds, which went directly to child care providers and programs, helped keep some businesses open. MS. GRIFFIS continued that thread is advocating for direct support to early educators and child care programs in the upcoming fiscal year, but she argued that a more stable child care sector would require a shift in current assistance program policies. She stated that the proposed legislation would change the eligibility for CCAP, allowing more families to participate, and it would change how provider reimbursements are determined, providing for a more stable child care system. MS. GRIFFIS stated that while thread supports the intentions behind HB 89, it has three recommendations to strengthen the proposed legislation. The first suggested recommendation would be to require the usage of the state's median income, as opposed to the federal poverty limit, in any eligibility changes to the CCAP. She said this consistency would help with program continuity. Per thread's second recommendation, she said, the cost-of-care language should be located in the portion of the statute which impacts the entire assistance program, not just the Child Care Grant Program. The final recommendation would be to include cost-of-care language in the reimbursement determination modeling, but it should not be the exclusive measure. She indicated that other states use a multifactor analysis, including cost of care and other relevant geographical and market rate factors. She concluded that thread would advocate for policies which reduce child care costs for parents and increase support for child care providers. 3:24:42 PM MS. GRIFFIS, in response to Representative Saddler, repeated thread's second recommendation. In response to a follow-up question, she stated that child care assistance is the reimbursement given to child care providers who serve families participating in CCAP, while the Child Care Grant Program provides direct support to child care providers. 3:25:55 PM MS. GRIFFIS, in response to Representative Mina, voiced that the factors in a cost-of-care analysis can vary for different states. She reiterated that factors could include the geography, market rate, and actual cost of care. In response to a follow-up question, she stated that the current market rates would need to be considered in the context of the different communities. 3:27:11 PM REPRESENTATIVE SUMNER pointed out the hard cap of 300 percent of the poverty line and questioned whether a phase out could be used instead. He surmised that a hard cap could create a situation where an incremental wage increase could have a negative value for those needing assistance for child care. 3:28:14 PM REPRESENTATIVE COULOMBE responded that [a phase out] was discussed and considered. She stated that the proposed legislation is a working document and expressed appreciation for the input from testifiers. She deferred the question to DOH. 3:29:08 PM HEATHER CARPENTER, Health Care Policy Advisor, Office of the Commissioner, Department of Health, concerning HB 89, stated that participants in public assistance programs could be disincentivized to advance in the workplace by a "fiscal cliff." She stated that the legislature would ultimately decide which policy levers could be used to help families. She reminded the committee that the programs under consideration are [the Child Care Grant Program and CCAP]. She stated that the Child Care Grant Program pays providers directly for costs to "keep their doors open and hire staff," and CCAP is a subsidy paid by the state to help families directly with monthly child care fees. Because the federal government does not allow the fee to be completely waived, every parent has a copay, and if wages go up, the copay will increase. She suggested that raising the eligibility standards to 300 percent of the federal poverty level, as the legislation proposes, would help families. Whether eligibility is based on the state median income or federal poverty levels, the state would pay on both; however, she advised "it would sure be easier if they were all on one." Ms. Carpenter said other policy levers would include reducing family copays and raising reimbursement rates paid directly to providers. She explained that the rate is set currently by a market survey, which is set by the federal government, and this methodology has to be followed. She advised that the federal government would have to give permission for this to be changed. 3:32:40 PM REPRESENTATIVE RUFFRIDGE expressed the appreciation that the proposed legislation is a working document. He referenced the presentation and questioned the statement on slide 8 which conveyed that DOH would scale the subsidy levels based on need. He commented that DOH is doing this now through copays. He questioned whether this would stay the same under HB 89. MS. CARPENTER responded that the question partly addresses the reason the fiscal note is indeterminate for the proposed legislation. She said DOH is waiting for direction from the legislature before reducing the current scale. She explained that currently an individual earning up to 85 percent of the state's median income has to pay a 9 percent copay. She suggested that DOH could continue on this scale, or the proposed legislation could make a change. She added that any change to this would require a regulation change. REPRESENTATIVE RUFFRIDGE referenced the proposed legislation's current form and, for clarification, stated that as a person's earnings nears the threshold of $64,144, the maximum copay would be 9 percent, unless something is changed. MS. CARPENTER responded that DOH would like guidance on this issue. 3:35:14 PM REPRESENTATIVE FIELDS offered his support for the proposed legislation. He questioned whether language addressing the wages [for care providers] should be added, as it would address the stability of the workforce in addition to access [to child care]. MS. CARPENTER responded that this would "get tricky." She stated that the department would pay child care assistance to private providers, but it could not direct how the money is spent. The assumption is, if providers are paid more, they would increase pay rates, but this is not a guarantee. 3:36:35 PM REPRESENTATIVE SADDLER questioned the definitions of child care, Head Start, and preschool. He also questioned the definition of "high-quality child care." 3:37:27 PM MS. GRIFFIS responded that to build kindergarten-readiness skills for children under the age of five, the settings in Alaska would be licensed child care programs, Head Start, and pre-kindergarten. She stated that licensed child care falls under DOH, while Head Start and pre-kindergarten fall under the Department of Education and Early Development. These components together form the system. In response to a follow-up question, she explained that Head Start is a federally funded program. She stated that she could provide specific information on the program [after the hearing]. She stated that pre-kindergarten in Alaska is publicly funded education through the school districts. She continued that licensed child care is outside of the other two settings. The licensing would be done through the state, but the setting would have more flexibility. For example, pre-kindergarten would occur during school hours for half a day, with the summers off, and this does not always fit with a family's schedule. She explained that, because needs are different, thread advocates for a mixed delivery system to make sure a variety of options are available. REPRESENTATIVE SADDLER confirmed that [licensed] child care would be characterized by flexibility in hours. He questioned whether an educational element of child care exists. MS. GRIFFIS responded that high-quality child care centers would have elements of pre-kindergarten and Head Start. The distinction for high-quality child care is the licensure, regulations, and funding. She stated that high-quality child care programs would have the same type of education and structure as pre-kindergarten. REPRESENTATIVE SADDLER expressed the understanding that "high quality" does not imply a difference in quality; it simply is a matter of how the center is regulated, funded, and licensed. He questioned whether low-quality child care exists. MS. GRIFFIS responded that unlicensed child care would be considered low quality. In regard to affordability, accessibility, and quality, she said the desire is to have affordable access to high-quality child care. She offered to follow up with more information on Alaska's Quality Recognition and Improvement System (QRIS). She said the rating system has five levels, with defined quality measures for each level, and QRIS training, support, and assistance is available for programs. 3:43:54 PM REPRESENTATIVE FIELDS commented that some states pay for quality. He voiced the opinion that the legislature could support the department by making direct payments or reimbursements to providers who achieve higher levels of training and certification. 3:44:33 PM REPRESENTATIVE RUFFRIDGE commented that the proposed legislation addresses recalculating the actual cost of child care. He expressed the assumption that this would entail a study and questioned the timeframe for this type of study. MS. CARPENTER responded that the department intends to do a market rate survey alongside a cost-of-care survey, with an added actuarial study. She stated that the department is starting the procurement process in order to have information for the next legislative session. 3:45:42 PM MS. CARPENTER, in response to Chair Prax, offered to provide details in writing on the studies. She added that some of the COVID-19 relief money can be used for the studies. In response to a follow-up question, she expressed the hope that the plan would be before the committee by the end of the week. 3:47:10 PM REPRESENTATIVE SADDLER, referencing the presentation, sited that the number of child care workers has decreased by 20 percent since 2018. He questioned whether this reduction corresponds to the same rate of decline in the total workforce in the state. MS. CARPENTER responded that the department does not have this data. She stated that DOH has been working with the Department of Labor and Workforce Development (DLWD) on demographics concerning who could be served by the proposed legislation. She stated that the answer would come best from DLWD. 3:48:20 PM CHAIR PRAX announced that HB 89 was held over.