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In the Nation's Interest

President’s Budget Proposes Investments in Early Learning Settings

Grace Reef
Early Learning Policy Group

It’s that time of year again on Capitol Hill!  The President has proposed his budget to Congress, which starts the discussions for a budget and appropriations process to evolve over the next 7 months (i.e., the new fiscal year begins October 1, 2015). 

What’s in the President’s FY 2016 budget for early learning?

Following the President’s State of the Union Address in January where he spoke repeatedly about the need to invest in child care and early learning settings for children, the budget he proposed this month provides the details – proposed increases in funding for child care, Head Start, Preschool, and early intervention programs.

Child Care and Development Block Grant (CCDBG):  The discretionary (appropriated) portion of CCDBG, would be funded at $2.8 billion in FY 2016, which represents an increase of $370 million. Of the increase, $100 million is for a new competitive pilot program designed to test and evaluate new approaches to meet unmet needs (e.g., nontraditional hour care, rural care, infant and toddler care, services for homeless children or children with disabilities, etc.).   About $266 million would be available to help meet the new requirements under CCDBG reauthorization. Discretionary funds require no match.

Child care funding is complicated. In addition to appropriated funds, there are additional funds referred to as “mandatory,” which are funds for child care allocated to states (some of which require a match). The President proposes continuing these funds at $2.9 billion per year. In addition to this funding, the President is proposing an additional $3.6 billion in mandatory funds for FY 2016 ($82 billion over the next 10 years) for a new child care initiative designed to serve all children under age 4 below 200% of the poverty level.   

Head Start:  Head Start would be funded at $10.1 billion, an increase of $1.5 billion.  About $1 billion of that amount is to lengthen the Head Start school day to at least 6 hours. Head Start enrollment is expected to be frozen but a 3.6% COLA at a cost of $284 million will help programs keep pace with inflation.

Early Head Start/Child Care Partnerships:  Funds for EHS/CC partnerships would be increased from $500 million to $650 million, which represents an additional $150 million for a new round of EHS/CC grants.

Preschool Expansion Grants:  Funds for preschool expansion grants were frozen in FY 2015 (no new funding was made available for FY 2015 grant awards). For FY 2016, the President proposes $750 million, an increase of $500 million.

Preschool for All:  For FY 2016, the President proposed $1.3 billion in mandatory money ($75 billion over 10 years) for a high quality preschool grant program for states.

Child Care Tax Credit Proposals:

Dependent Care Tax Credit (DCTC):  The President proposed an expansion of the DCTC as one of his middle class initiatives. Under current law, the DCTC allows parents to claim a credit of up to 35% of eligible expenses for one child and up to $6,000 in eligible expenses for two children. The credit percentage declines by 1 percentage point for every $2,000 increase in income until the percentage reaches 20% (at income above $43,000).  Also under current law, employers can offer dependent care assistance plans (DCAPs), which allow employees to set-aside up to $5,000 of their income tax-free to be used for child care purposes. 

The President’s proposal would make the credit more generous, particularly for families with children under age 5, and repeal DCAPs.  The President would increase the income level before the credit begins to scale down from $15,000 to $120,000 (income above $148,000 would have a 20% credit).  Parents with children under age 5 could claim a credit equal to 50% of expenses up to $6,000 for one child and $12,000 for two children. The credit rate for the young child credit would phase down by 1 percentage point for every $2,000 in income  over $120,000 until the credit rate reaches 20% for parents with income above $178,000. The income expense limits would be adjusted for inflation for both credits. The credit would not be refundable.
The current DCTC costs about $4.4 billion per year. The expanded DCTC would cost about $5 billion per year.

Where do we go from here? What’s next?

The President’s proposed budget is just the first step. Next, Members of Congress in the House and the Senate need to review the President’s proposals, determine how those proposals align with priorities they see for next year, and draft their own budget. That process will evolve between this month and next fall. 

What is important is that investments in early learning for children be a bipartisan priority. Early learning settings are important to: (1) ensure that young children are in a safe setting that also promotes their healthy development and (2) in the case of child care, helps support parent employment.  Studies show that high quality settings make a difference for all children – but particularly for low income children who the research shows benefit the most.  CED has a history of releasing reports related to investing in quality child care and preschool.  For more information about CED reports on early learning, click here.