SLOAN | Time has come for child-care savings accounts in Colorado
Author: Kelly Sloan - August 6, 2018 - Updated: August 6, 2018
The cry goes up, as it does periodically, for the government to do something about the issue of child care expenses. More mothers are, of course, in the work force now than at any other time, and fewer households than ever claim a stay-at-home parent; so the problem is certainly acute, though the question is still asked in some corners as to what extent it is one that falls squarely on the government.
A novel potential solution was introduced in the Colorado State Legislature last session which, if ever adopted, may present a realistic approach – offering relief to those navigating the dilemma of providing for their children’s care in the absence of feasible alternatives, while minimizing the damage which often accompanies direct government interventions.
Consider the figures: it is estimated that in Colorado 250,000 children under the age of five live in households where all adults participate in the workforce. Of these, 7% (17,500 children) receive child care tuition assistance, in the form of the Colorado Child Care Assistance Program (CCCAP); 13.2% live in households with high incomes ($90,000 for one parent or $180,000 household income). This means that roughly 80% of children in households where all adults work fall into the gap between those receiving government child care assistance and those whose parents can realistically afford child care.
With these sorts of numbers, the pressures exerted on lawmakers becomes considerable. The typical solutions proffered at both state and federal levels represent either a) exactions on business owners that strain both economic and moral credulity, or b) more or less direct subsidization of child care, the sort of government-to-child arrangement which inevitably minimizes the value and decision-making capacity of the parents. Any program buffeted by federal dollars includes automatic limitations – the funds or credits cannot be used for placing the youngster in a church-run center, for instance.
In the late 1980’s, the Act for Better Childcare worked its way through Congress, eventually coming out the other end as the Child Care and Development Block Grant (CCDBG). Hailed at the time as a remarkable achievement and something of a Holy Grail for providing access to child care for single-parent or working families, there have since been regular efforts to expand it, the latest federal attempt being the Child Care for Working Families Act. It is interesting to note that although CCDBG funding nearly doubled over the previous year, not a single additional child in Colorado was placed on the CCCAP roles. Like most government programs, the CCDGB progressed rapidly from solution to stepping stone. Federal programs have a habit of self-gestating, in inverse proportion to their usefulness.
Of course, there is also the argument, quite persuadable, that it is not, under any structure, a federal responsibility, being more naturally suited to consideration by the lower levels of government. Someone once observed that if the care of our offspring falls under the aegis of federal responsibility, there cannot be much that doesn’t.
So it appears the time has come to experiment with a new design. A promising one was introduced this past session by State Sen. Owen Hill. What SB18-265 sought to do was to create a new financial instrument in Colorado, similar to a Health Savings Account, which would serve to provide for the families which most require it a means to save for the care of their young children – absent both the attached strings which invariably accompany federal programs, and a injudicious shift of the financial burden onto business owners.
The individual accounts which the bill was to create would be funded with $2,500 annual maximum contributions from whosoever wishes to contribute to them, and for which the contributor receives a 10 percent Colorado state tax credit. An employer may contribute to multiple employee’s accounts, though may only claim a tax credit of up to $25,000 in total. Anyone else – the child’s grandparents for instance, perhaps too elderly or distant to help out any other way – may elect to kick in too, subject to the same limits and tax credits. The money remains un-taxed and un-penalized upon withdrawal, provided it is utilized for qualified child care expenditures, allocated as the parents see fit.
One hopes Sen. Hill will run with this idea again, and that the structural advantages will encourage Democratic co-sponsorship. This approach is offered, after all, in the same spirit as HB-1217, sponsored in the House by Democratic Representative Alec Garnett and Republican Kevin VanWinkle, which permitted employers to receive a tax credit on contributions made to their employees’ 529 College Saving Plans. Such arrangements would seem to accomplish the identified objectives, and do so with neither coercion nor the economic distortion common to more traditional approaches. They deserve a closer look in the next legislative session.