This afternoon, Voices for Children Economic Stability and Health Policy Coordinator Aubrey Mancuso testified in support of LB 81, which addresses the cliff effect in child care subsidies. The cliff effect refers to a challenge with the structure of our public assistance programs where families receive a small increase in income that results in a benefit loss that the income does not compensate for.
Nebraskans are hard working and have a strong work ethic. Nebraska currently ranks fifth nationally for the highest number of mothers in the workforce and 70% of kids under six have all available parents in the workforce . The child care subsidy program helps make child care affordable for lower income working families who may otherwise be unable to work or afford formal child care.
In 2002, then-Governor Mike Johanns line-itemed vetoed $4.5 million from the child care assistance program, reducing the eligibility requirement from 185% of the federal poverty level to 120%. This decision was made based on budget considerations, and not on the significant evidence that demonstrates the importance of access to affordable and quality child care. In the decade since this cut, the cost of child care has continued to rise and income eligibility for the program has remained among the lowest in the entire country at 42nd
What Nebraska’s low income eligibility has meant for many lower income working families, and especially for working mothers, is that they are forced to choose between increasing their earning potential or maintaining incomes low enough for child care assistance. Although we have heard this story anecdotally for many years, in 2014 we set out to better understand this challenge by conducting surveys and focus groups with low-income women. Attached to my testimony is a report that compiles the results of these surveys and focus groups. Not surprisingly, the “cliff effect” emerged as a significant challenge for lower income families participating in public assistance programs. A total of 46% of respondents who had participated in public assistance programs had faced the cliff and 55% of those in the child care subsidy program had experienced the cliff. In addition, 52% of those who had faced the cliff had used a coping strategy in order to continue to meet monthly expenses. The most common coping strategy was cutting hours at work, followed by not getting married, not taking a raise, and not accepting a job offer. The cliff effect serves as a disincentive for these positive economic behaviors by cutting families off immediately rather than allowing for a more gradual and realistic transition off of assistance.