The main purpose of this paper is to examine how state policy changes in child care subsidy affect child care subsidy receipt and child care stability among young children in Illinois.  Specific aims are to examine (1) how increases in income eligibility affect continuity of child care receipt, and (2) how increases in pay rates to providers affect stability in child care arrangements.

Previous research shows the receipt of the subsidy tends to be short and sporadic (Davis et al., 2013; Grobe, 2008; Ha et al., 2012).  Further, low-income families often struggle to maintain stability in child care arrangements, which is critical for healthy child development and stable parental employment.  In the state of Illinois, a series of major policy changes in child care subsidy programs were implemented, yet the impact of the policy changes on families is understudied.   In 2007, the family income eligibility for child care subsidies increased from 50% of state median income for each family size to 185% of the Federal Poverty Line (FPL), and this change raised the ceiling by 7.5% from $34,583 to $37,170 for a family of four.  It is possible that income eligibility has significant influences on the continuation of child care subsidy receipt.  Further, Illinois became the first state to negotiate and sign a statewide contract for home-based providers, allowing the subsided home-based providers to organize and engage the state in collective negotiations with their representatives in August 2005; and as a result, this resulted in increases in provider payment rates (Chalfie et al., 2007) in 2006-2008.  Research has shown that increases in provider payment rates would increase the number of providers accepting subsidy, sustainability of providers, and the stability in child care subsidy (Grobe, 2008).  Further, as child care subsidy receipt is highly associated with stability in child care (Ha et al., 2012; ACF/OPRE, 2010), we hypothesize that those major policy changes in Illinois also affected stability in child care arrangements.  Since providers with rates that are higher than the state cap may refuse the children or they will lose the money on each subsidized child they serve, increasing provider payment rates will increase the participation of providers in the subsidy system though relatively little research conducted in this area (Adams and Rohacek, 2002). 

 The study uses monthly child care subsidy administrative data from the state of Illinois from 1999 to 2013.  We create a longitudinal data of young children who first received child care subsidy under age 3 and follow them up to age five.   We employ a quasi-experimental design and create one group of children who experienced the 2006-2008 policy changes (experimental group) and the other group of children who did not experience such changes (control group).  Propensity score matching is used to compare how two groups differ in continuity of child care subsidy and stability of child care.