Idaho Child Care Program overspending leads to $16 million deficit

The Idaho Child Care Program (ICCP) is projected to face a nearly $16 million budget deficit as bureaucrats expand eligibility and overpay for benefits. While conservatives are responding with cuts, more sustainable solutions require closing accountability gaps and a comprehensive restructuring of child care entitlements.

In a letter Alex Adams, director of the Idaho Department of Health and Human Services (IDHW), warned the Budget Committee that the ICCP will significantly exceed its budget without course correction, noting that “the combination of increased local market prices, payments at a higher percentage of local market prices, reduced co-payments for families, and increased eligibility has resulted in a projected budget deficit.”

IDHW is projecting a deficit of $15.5 million for the current fiscal year, rising to $22.2 million next year. That is about 29 percent and 39 percent more spending on social services than originally expected. This deficit is despite a deficit of $10.3 million increase of benefit expenditures that the program has already received this year.

When surpluses occur, it is rare for bureaucrats to reduce the size of programs to stay within their budget allocations. It appears that the IDHW originally planned to extort the additional funds from lawmakers—and, by extension, taxpayers.

As the newly installed IDHW director, Adams is bucking the status quo by reducing the size of ICCP to stay within budget, including ensuring benefits go to those truly in need, pausing new enrollment, and covering a more appropriate market share.

The ICCP was originally designed to provide child care assistance to low-income, working families with children under 13. These government-funded subsidies can help reduce the cost of child care for eligible families.

Childcare prices continue to rise Faster than inflation, which is weighing on families across America. Adams' letter noted that these costs in the Gem State have increased 25 percent in just three years.

But the program itself may be partly responsible for these rising costs. Federal regulations require ICCP benefits to be tied to the market price of child care. This model contains perverse incentives: If providers know that government payments are based on surveys of their prices, they are incentivized to raise prices to collect more money—regardless of actual operating costs or value.

The increased costs are far from the only reason for the program's funding deficit. The program's benefits have become increasingly generous in recent years, covering people with higher incomes and more expensive child care facilities while reducing recipients' co-payments.

Federal regulations allow IDHW to determine the value of benefits relative to market prices, but require states to cover at least the median market price. This means that at least half of all child care programs in the state must be fully covered by the ICCP.

The IDHW significantly exceeded this minimum requirement by funding between the 75th and 85th percentiles—the federal maximum. That means it covered all but the most expensive state child care programs.

In addition to this comprehensive coverage, the department reduced the little financial accountability that existed in the program. Beneficiaries must cover part of the cost of child care through co-payments, but the department reduced all rates by half.

In addition, more people can now qualify for the ICCP. In 2023, the IDHW changed an administrative rule and increased the income threshold from 130 percent to 175 percent of the federal poverty level – about $54,600 for a family of four, which is $10,000 more than the national mediumThis expanded the circle of eligible households and was accompanied by a sharp increase in enrolment.

The combined effect of these policy changes increases costs, reduces accountability, and encourages dependency. While it is true that child care costs are rising, the real cause of the program's budget problems is that it overpromises for benefits without accountability and then expects taxpayers to make up the difference.

Decisions to reduce co-payments and to over-expand market coverage were made without legislative oversight within the framework of state plans, which are direct agreements between the federal government and the IDHW.

State plans allow agencies to bypass the legislature because they adhere to higher levels of law, such as statutes and administrative regulations—which can be both vague and give agencies too much discretion. While this inherent leniency also allowed the director to make the necessary cuts, the legislature must provide more specific language to prevent these problems in the first place.

Adams is right to cut the program rather than seek additional funding to maintain surpluses, but this is not a permanent solution to a chronic problem within the bureaucracy.

Lawmakers should consider policies that require agencies to obtain legislative approval for all state plans that affect eligibility, benefit levels, or program spending. This would increase transparency by closing a legislative loophole and clearing legislative paths for policy changes.

The financial impact of policy changes, such as state plans or regulations, should also be examined independently of the agency. In his letter, Adams points out that the regulations were passed in the Senate only after the agency had stated – incorrectly – that its budget would allow for an expansion of eligibility to 175 percent of the federal poverty level.

In the future, both Parliament's Budget Committee and the Division of Financial Management should report the financial impact of proposed changes. This would allow lawmakers to better understand the consequences of these proposals before they are adopted.

When it comes to child care costs, Idaho should consider alternatives to expanding benefits. Options that deregulate the industry and eliminate perverse incentives could reduce costs. Loosening regulations that should be left to the discretion of the market (read: parents) can make a bigger difference. Difference.

The IDHW has recently taken a step in the right direction by increasingly the permissible care ratio. This change increases the number of available care places without additional investment in infrastructure or Make compromises Security.

The reason for ICCP's $16 million budget deficit was not only the rising cost of child care, but also the agency's over-promising of generous benefits at taxpayer expense. Adams is doing the right thing by cutting the program to save money, but the Idaho Legislature must go further to get a handle on an uncontrolled bureaucracy. Not only would taxpayers be grateful, but they may find that less interference and a freer market reduce the need for the program overall.