Child-Care Provider Subsidies in New Jersey: An Analysis of Issues, Impacts, and Options

August 10, 2023

The New Jersey State Policy Lab has published a new report, Child-Care Provider Subsidies in New Jersey: An Analysis of Issues, Impacts, and Options.

In 2020, New Jersey switched to an enrollment-based childcare subsidy policy from the existing attendance-based system, both for public health purposes and to ensure a consistent stream of income to childcare providers during the pandemic. This shift in subsidy payment mechanisms was supported by temporary federal government COVID relief funds, which are set to expire on December 31, 2023.

The New Jersey State Policy Lab research team was asked to analyze the relative costs and other implications of these two payment mechanisms and developed a study that combined findings from both a quantitative financial analysis of each payment system using state administrative data and a qualitative approach that provided insights based on key stakeholders' experiences gathered through focus groups and interviews. The results from this study were prepared into a report, Child-Care Provider Subsidies in New Jersey: An Analysis of Issues, Impacts, and Options. Andrea Hetling, Ph.D., Associate Director of the Heldrich Center and Professor at the Bloustein School of Planning and Public Policy, was one of the report’s authors.

Analyses, using the administrative data, indicate that the enrollment-based system is more expensive in terms of the expenditure of federal and state funds. When comparing the enrollment-based system with the attendance-based system, the difference is about 5 percent. Qualitative findings reveal, however, that because of the attendance-reporting requirements and the greater amount of reconciliation payments, the attendance-based system is more costly to providers and burdensome to parents. 

An important implication of this study is that no one size fits all — there is unlikely one best solution that would maximize enrollments and high-quality childcare while minimizing both pecuniary and non-pecuniary costs across the spectrum of providers, as well as to the state and participating families.

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