Idaho halts accepting new families after $15M budget shortfall in child care grant program

BOISE (Idaho Statesman) — A child care program for low-income children in Idaho faces a $15.5 million budget shortfall this year, after the state expanded eligibility and reduced what families are required to pay each month while day care costs rose, according to the Health and Welfare Department.

The deficit has prompted state health officials to temporarily stop accepting many new families into the Idaho Child Care Program, which partially covers child care costs for low-income families with working parents, Health and Welfare Director Alex Adams said at a news conference Tuesday. The anticipated shortfall is more than 29% of the program’s overall budget for this fiscal year, which ends in June 2025.

Without any changes, that deficit could grow to $22 million in the following fiscal year, he said, though both numbers are worst-case scenarios. Nearly 8,100 kids are enrolled in the program this year.

“We know that we’re in the red, which is why we’re taking action here in August, so that by the time the Legislature rolls around, there’s a robust conversation about where we go from here,” Adams said.

To cut down on costs, the department plans to temporarily pause admitting many new families that apply to the program; lower the income threshold to reduce the number of people who can qualify for the program; and delay paying higher rates to day care centers for several months, according to an Aug. 14 letter Adams wrote to lawmakers on the legislative budget committee, which the agency shared with the Idaho Statesman. Those changes are expected to keep the program within its budget in the coming months.

The misstep, which predates Adams, is expected to prompt another legislative review next year at an agency already facing scrutiny over how it spends taxpayer money.

Costs of Child Care Rise

The money for the day care payments comes mostly from a federal program called the Child Care and Development Block Grant, which requires a survey every three years to assess the costs of day care. The department’s most recent survey, which was completed this month, found that market rates spiked by 25%. The higher costs of care translate to more dollars that the agency needs to shell out for the program.

Meanwhile, the department reduced the costs participating families must pay each month during the COVID-19 pandemic and kept those lower fees in place. The state dropped families’ costs by roughly half since 2020, Adams wrote in the letter.

The state agency also widened the net of families eligible for the program over the years. In 2021 families whose income met 145% of the federal poverty level qualified, an increase from the previous 130% threshold set a decade earlier.

This year the eligibility cutoff rose to 175%. For a family of three, the federal poverty level is $25,820, according to the U.S. Department of Health and Human Services.

While health officials paused enrollment, they said Tuesday that they would make some exceptions for certain vulnerable groups. Children in foster care, those experiencing homelessness, those with disabilities and families receiving temporary cash assistance from the state will still be allowed to enroll.

Adams told reporters Tuesday that officials learned about the issue a few weeks ago when Health and Welfare completed its new costs study and have since been trying to figure out how to rein in spending while minimizing the impact “on those most at-risk populations.” In the interim, he said he is hoping to keep more kids in the program at lower reimbursement rates.

Idaho’s budgets are written into law and can only be altered with the approval of the Legislature and the governor. Lawmakers won’t reconvene until January and will be able to determine whether to change the program’s provisions. Adams said that under the circumstances, he wants to lower the grant amounts to be able to provide more families with some money.

“From the department’s perspective, we think covering more kids at a lower rate is preferable to covering fewer kids at a higher rate,” he said. “But ultimately, that’s a policy decision that I think the Legislature will wrestle with.”

Adams also said there need to be “holistic solutions.” He pointed to efforts by Boise officials to reduce the time and cost of becoming a licensed day care and other measures that could increase the number of day cares as costs have soared across the country.

Child care centers in the Treasure Valley have struggled in recent years, partly because of low pay and high turnover in the industry, according to previous Statesman reporting. The number of day care spots for kids in the state dropped by more than 1,300 from 2022 to 2023, and the industry lost hundreds of workers, according a nonprofit report. The median wage of a child care worker was $13.50 per hour.

Adams said that the state’s subsidized program has been under budget in previous years, and the federal grant program allows the state to hold on to dollars it didn’t spend in prior years. Health and Welfare has saved as much as $50 million in a separate account, he said — but the money would need to be appropriated to the program by lawmakers.

‘Show me the spreadsheet’

The budget misfire at Health and Welfare is likely to increase scrutiny on the state’s largest agency from lawmakers, who alleged the agency misspent funds in the past and are often reluctant to spend money on welfare programs. Attorney General Raúl Labrador has also been investigating a different child care program at the agency.

Adams took the helm at Health and Welfare in June, after former director Dave Jeppesen retired in December following five years in the position. Dean Cameron, the director of the Idaho Department of Insurance, served as interim director in the intervening months.

Reached by phone Tuesday, Rep. Wendy Horman, R-Idaho Falls, and Sen. Scott Grow, R-Eagle, co-chairs of the Legislature’s budget committee, were critical of the agency’s prior leadership for not forecasting the program’s costs correctly.

“We’ll be asking for a full report of what on Earth happened in the previous administration that caused this expansion of services that did not fit within the budget,” Horman said, as well as “why those decisions were made, how they were made, who made them.”

“Show me the spreadsheet” the agency had that indicated they had sufficient funds to cover the program’s costs, she added.

Horman and Grow said they supported any actions the agency takes to get back in line with the budget. Grow said he has “total confidence” in Adams.

“We cannot spend money that we don’t have,” Grow said. “We have to live within that budget ourselves, and we expect all agencies and departments to do the same.”