Child care subsidies play an important role in stabilizing parental employment and helping low-income families access quality and affordable child care options. However, low-income families on average only maintain subsidies for short spells of time. While families stop using subsidies for many reasons, policymakers and researchers have expressed concern that strict eligibility determination policies may create barriers to subsidy maintenance. Unstable subsidies, in turn, may contribute to unstable employment and to unstable care environments for children.

Using data from the Urban Institute's CCDF Policies Database and the Administration for Children and Families' CCDF Administrative Dataset, we analyze the effects of state eligibility redetermination policies on average spell length and stability of child care spells from 2007 to 2010. We examine policies regarding: whether job search is treated as a subsidy-eligible activity; the length of time after eligibility certification until a family must redetermine its eligibility; and requirements around reporting changes in income. To calculate the effect of each of these policies on stability of subsidy receipt, we use difference-in-difference models with fixed state and time effects and exploit changes in policies within states over time.

We find that having more flexible policies around each of these areas significantly increases the share of the income-eligible population of children within a state who are observed receiving a subsidy continuously for 12 or more months; flexible policies around reporting income changes are the single most powerful policy. In addition, these policies complement one another, so that enacting all three policies increases the share of children with a stable subsidy spell by more than would be expected from observing the effects of each policy in isolation. Together, these three policies appear to increase the share of eligible children observed with a stable spell by 2.26 percentage points, which would double the share of eligible children with a stable subsidy in the average state. Moreover, among families observed with a subsidy, these flexible policies appear to have particularly beneficial effects for families receiving TANF, suggesting that the policies matter especially for some of the most vulnerable families served by the subsidy program.

We note that it is important to examine all eligible families, not just those who show up in the caseload, in order to understand the impact of eligibility determination policies. Naive analysis of the administrative caseload data suggests, counter-intuitively, that less flexibility in eligibility is associated with an increase in average spell length.  When measuring the share of eligible children with stable spells, rather than the share of recipient children, the correlation is reversed. This change in denominator captures the fact that states with more restrictive policies end up serving only a more stable sub-population of eligible families, meaning that the share of stable spells is higher simply because the number of total spells is lower.  These findings provide additional evidence that rigid eligibility determination policies prevent many of the most vulnerable families--who tend to have unstable employment, fluctuating income, and difficulty fulfilling eligibility recertification requirements--from accessing subsidies at all.