An examination of child care provider participation in state subsidy contract systems

Under the Child Care and Development Block Grant Act of 2014, the federal government requires that states build their supply of high quality child care and ensure that subsidy-receiving children have equal access to care. While the majority of states use child care vouchers as their primary or only subsidy mechanism, federal policy encourages states to directly contract with child care providers for subsidized slots as a strategy to promote quality and access to care, particularly for underserved populations. However, little is known about the characteristics of providers that participate in contracts or the factors that hinder or facilitate their participation. This study seeks to identify correlates of provider participation in contracts versus vouchers using administrative data on licensed center-based child care providers participating in Massachusetts’ subsidy system. The study finds that while centers that are members of umbrella organizations or are accredited are more likely to participate in contracts compared to vouchers only, centers that are for-profit organizations or located in communities with higher median household incomes are less likely to participate in contracts. No evidence is found to suggest that a larger gap between centers’ private pay prices and the subsidy reimbursement rate influences their participation in contracts. These results suggest that higher administrative capacity or mission-driven providers are more likely to participate in contracts and that contracted slots are likely to be available in low-income areas, which can help to improve access to care for low-income families.