This file was prepared for electronic distribution by the inforM staff. Questions or comments should be directed to inform-editor@umail.umd.edu. Child Care Why Child Care is a Concern "Some of you may remember my daughter attending staff meetings, crawling around the office [of the Secretary of Defense]. ...I know what can happen when child care arrangements go awry. Frank C. Carlucci, Former Secretary of Defense With the above comment at a ground-breaking ceremony for the Pentagon's child care center, then Defense Secretary Carlucci acknowledged a fact of life for all working parents. Whatever their role in the world, people with children (or dependents of any age), have a responsibility which must be addressed on an ongoing basis. When problems in providing care arise, they can't be ignored or postponed until a more convenient time. Thus, with predictable unpredictability, dependent care responsibilities occasionally intrude on the world of work. When they do, both employees and employers must be prepared to respond. This reality was succinctly described in the Harvard Business Review, which noted that: Dependent care is a business issue for the obvious reason that employees cannot come to work unless their dependents are cared for. Study after study shows that most working parents have trouble arranging child care, and that those with the most difficulty also experience the most frequent work disruptions and the greatest absenteeism. -12 Given this impact on their employees' ability to do their jobs, increasing numbers of employers are recognizing the importance of appropriate child care benefit programs. One business leader spoke about his firm's need "... to anticipate the needs of tenants and their changing workforce. Historically there was a time when air conditioning and elevators were considered luxuries for buildings. Child care is now at that critical point in time, moving from luxury to economic necessity." -13 In this regard, it is worth noting that OPM specifically alerted agencies to the need for child and dependent care programs about 3 years ago. This was accomplished through a memorandum which the director of OPM sent to the heads of departments and agencies in June 1988. It began with the following statement: Our nation is undergoing significant demographic, social and economic changes that will have profound effects on the Federal workforce in the years ahead. Among these trends are the increasing numbers of working women and two earner family members as well as the growing percentage of the population that is elderly. These developments are increasing the number of Federal workers who have dependent care responsibilities for children and older family members. The pressures of these responsibilities can adversely affect job performance and employee well-being. -14 Range and Cost Effectiveness of Possible Solutions In formulating its response, the Government must be prepared to provide a variety of solutions, since the child care needs of its employees are so varied. Simply providing onsite child care centers, for example, does not make child care problems disappear for all employees. This was noted by a representative from the General Services Administration (GSA) (which helps provide child care centers in Federal buildings), who was quoted in a recent article as saying, "'Many parents don't want or need onsite child care,' because they would have a tough time steering a 2-year-old and a bulging diaper bag through Metro at rush hour ..." -15 More generally, day care for preschoolers (whether onsite at the workplace or located nearer to employees' homes) is only one part of the child care puzzle. One recent study spoke of another piece of this puzzle, the "3 o'clock syndrome." This syndrome was defined as "...what happens in the workplace at 3 p.m., when latchkey children begin arriving home from school and workers begin worrying more about their kids and less about their work. The 3 o'clock syndrome is blamed for everything from lost productivity by office workers to errors on the assembly line by factory workers." -16 In fact, as one tries to define the outer limits of what a comprehensive child care benefits package could encompass, the options easily become overwhelming. Some problems, like the 3 o'clock syndrome, probably don't lend themselves to any specific solution. Others may have solutions which work but are too expensive or perhaps unsuitable for the particular employer. Researchers have found that "[t]he options available to employers interested in addressing the child care concerns of their employees fall into four general categories (from Corporate Child Care Options, by Catalyst): (1) informational assistance; (2) financial assistance; (3) direct care services; and (4) time (flexible personnel policies)." -17 From these general categories, employers must choose which specific benefits to offer, considering such things as how many employees would need or use the benefit, what the benefit would cost, how well it fits into the organization's culture, and whether the benefit would actually solve a management problem (e.g., excessive turnover of clerical employees). Listed below is a sampling of direct child care benefits that are currently in vogue (many other benefits indirectly affect child care needs, like flexiplace and job sharing). Few employers, if any, currently offer all these benefits, but as figure 3 showed earlier, a majority of employers may be offering at least one of these benefits by the year 2000: * Informational assistance: --Child care resource and referral services. * Financial assistance: --Vouchers/subsidies for day care; and --Flexible spending accounts/dependent care assistance programs. * Direct care services: --Onsite, or near-site, day care; --Preferential admission at local day care centers; --Drop-in day care for use as a backup, when usual child care falls through; --Day care for mildly sick children; and --After-school and summer programs for school-age children. * Time (flexible personnel policies): --Ability to use sick leave to care for sick children. If looked at from a narrow perspective, any of the above-mentioned child care programs are not free--it costs employers something to provide these benefits. On the other hand, since few employers act only out of altruism, it seems likely that they must perceive some benefits accruing to their interests, or the various employers (including the Government) would not be providing the benefits in question. One researcher who has studied the question of how cost effective child care initiatives are was quoted as noting the following: ...75 percent of the companies in her study believed that the benefits of the child care initiatives far outweighed the cost. They believed that such efforts led to a lower rate of absenteeism, greater stability and loyalty, improved employee morale, enhancement of the company's image, improved recruitment and retention of quality employees, less employee stress and distraction, and the earlier return of employees from maternity leave back to the work force. -18 Agencies' Views on Child Care Benefits and Problems In order to gauge how Government agencies view the cost effectiveness of child care initiatives, we asked the directors of personnel of the 22 largest Federal agencies about the impact of child care benefits on their ability to recruit and retain employees, and the impact of child care problems on productivity. Their responses are shown in tables 2 and 3 below. Table 2 Number of agencies choosing the indicated response to: "Of what significance to your agency's ability to successfully recruit new employees and retain existing employees are the child care options the agency currently provides?" Recruit new Retain existing employees employees 3 2 Great significance 3 4 Moderate significance 3 2 Minor significance 1 2 No significance 8 10 Don't know/Can't judge 2 Not applicable (Don't provide child care options) Table 3 Number of agencies choosing the indicated response to: "To what extent are child care problems having a negative impact on the productivity of employees who have minor children (e.g., increased absenteeism and sick leave, unscheduled days off, late arrivals and early departures, greater than average personal telephone usage, employees stress)?" 1 To a great extent 7 To a moderate extent 4 To a minor extent 0 To no extent 10 Don't know/Can't judge The above responses show that, of the agency personnel directors who felt able to answer our questions, most believe that child care benefits have some influence on the recruitment, productivity, and retention of Federal workers. As mentioned earlier, it appears that increasing numbers of private sector firms have reached the same conclusions relative to their workers. It thus seems reasonable to conclude that providing some kind(s) of child care benefits to its employees can be in the best interest of the Government. Which benefits those should be, and at what out-of-pocket cost to the Government they should be provided, of course, become the next pertinent questions which must be addressed. In our questionnaire to agencies, we also sought to gain an understanding of what child care benefits agencies thought would be most cost effective in helping them recruit and retain employees. Table 4 below lists the choices we gave the agencies and the number of agencies that listed the particular benefit as being either their first, second, or third priority choice. Table 4 Child care benefits agencies were asked to consider for cost effectiveness, ranked by the number of agencies who listed the indicated benefit as one of their top three priorities. 13 Onsite child care center (with or without employer subsidies) 11 Flexible spending accounts -19 8 Reduced rates for lower income employees at onsite centers 7 Resource and referral services to private sector child care providers 6 Day care for mildly sick children 6 Ability to use sick leave to care for a sick child 4 After-school and summer programs for school-age children 3 Vouchers usable at offsite centers 3 Other (specify) 1 Preferential admission or slots reserved for employee's children at local offsite centers If Government policymakers consider additional or expanded child care benefits in the future, the priorities reflected above should provide a helpful roadmap of what benefits might be most useful to the Federal community. In this regard, it is particularly interesting to note the number of agencies showing "flexible spending accounts" (FSA's) as one of their top three choices. While FSA's are increasingly common in both public and private sector benefit packages, they are not currently available to Federal employees. (For a more detailed discussion of FSA's, see the later chapter addressing cafeteria benefit plans.) Availability of Onsite Child Care in Federal Offices If child care has, in fact, become an economic necessity, and benefits such as those mentioned above are being achieved by some employers, where does the Federal Government stand in this process? In order to find out, we asked agencies and OPM whether they had determined what child care needs existed and how they were being met. In response, 19 of the 22 largest Federal agencies reported having conducted some child care needs surveys. Typical of their findings are the following responses: "... [I]t is concluded that there is strong civilian employee interest in having affordable child care services." Department of the Air Force "Local surveys ... indicate a need for additional care for civilian employees' children." Department of the Army " ... 1,100 employees responded to a survey and indicated a strong interest in onsite child care services." Department of Health and Human Services There is, of course, a difference between conducting surveys and actually providing services. OPM did a study of Federal dependent care programs in April 1990, which produced the following findings: * While more than a third of the 175 Federal installations visited had established onsite child care facilities, the majority of these (69 percent) are at Department of Defense (DOD) installations. DOD centers typically allow civilian employee usage only on a space-available basis, and many of these facilities have little or no space available; * Seventy-eight percent of the installations reviewed had an agency policy and/or installation-level program on at least one aspect of dependent care. However, OPM found that installations from the same agency disagreed "to a considerable extent" as to whether there was an agencywide policy on dependent care and what it was; and * Just over half of the installations with dependent care programs include training or other information to employees and supervisors on dependent care, to increase understanding and use of existing programs. -20 Based on OPM's findings, it appears that while some progress has been made in opening child care centers in Government space for children of civilian employees, there is still much to be done. The following item from the Employee Benefits Review newsletter both succinctly describes this situation and puts the potential supply and demand factors into perspective: As of March, 1990, there are 65 child care centers operating in Federal space controlled by the government's landlord, the General Services Administration (GSA). Another 45 are expected to open in GSA-space by Fiscal Year 1993, and another dozen or so Federal centers, such as those in the U.S. Senate, the House of Representatives and the Central Intelligence Agency, operate in non-GSA space. Altogether, these federal child care centers serve more than 2,000 off-spring of federal civilian employees, according to testimony provided at a House of Representatives hearing held on the issue in March, 1989. There are, however, according to hearing testimony, about 200,000 federal civilian employees with children who require child care. (Emphasis added.) -21 In order to understand the significance of the above data regarding numbers of child care centers and children being served, it is helpful to have some background on when and how the Government's program to provide onsite child care began. Before 1985, onsite child care centers were largely unavailable to employees of Federal civilian agencies. A major breakthrough occurred in 1985, when Congress specifically provided for the expenditure of public funds to provide space and services for child care facilities serving Federal employees, through passage of what has come to be known as the "Trible amendment." While this amendment was initially a temporary provision, it was made permanent in 1988, when it was codified as part of the United States Code. -22 The language now found in 40 U.S.C. ("Public Buildings, Property, And Works") specifically provides in section 490b that, "during fiscal year 1988 or any fiscal year thereafter," an agency may use space in Federal buildings for child care services if: * Space is available; * The agency determines that the space will be used to provide child care services to a group of individuals of whom at least 50 percent are Federal employees; and * The agency determines that the group will give priority to Federal employees. Section 490b goes on to state that the space being allocated under the above provisions may be provided "without charge for rent or services." While this form of subsidy does make Federal facilities less expensive than private sector centers, they are still not cheap. According to the Employee Benefits Review newsletter, "As of March, 1989, the cost to parents for the onsite care averaged about $85 a week, which is between 5 and 20 percent less than what non-federal centers charge for equivalent care ..." -23 Notwithstanding the space subsidies, the newsletter went on to note Federal child care charges for infant care ranging from $65 per week in Ogden, Utah, to $160 per week in Boston, Massachusetts. These cost differentials were attributed to differences in real estate costs. Affordability of Child Care Child care expenses can be a major part of the family budget. According to one recent study: It can cost a family anywhere from $1,500 to $15,000 a year to provide care for children; most spend around $3,000. This cost is usually a family's fourth largest expense after housing, food, and taxes. A parent working full time at minimum wage would have to spend approximately 40 percent of his or her paycheck to care for one child--a major impediment that keeps many capable workers out of the labor market. -24 As mentioned above, the Trible amendment allows Federal child care centers to charge Government employees 5 to 20 percent less than competing private child care centers. While this makes onsite child care more affordable than it would be without such subsidy, the resultant cost is still beyond the means of many Federal employees. Since Federal agencies experience some of their highest turnover in lower graded occupations, and, in some urban areas, have the most difficulty recruiting qualified applicants in these occupations, the question of affordability of child care has very practical significance for the Government's ability to recruit and retain a qualified workforce. However, the factors which influence how much a child care center must charge for its services are the same as for any business operation. For example, a center could increase revenues by charging some customers more (i.e., by using a sliding-fee scale), or if organized as a nonprofit corporation, by securing donations from charitably minded people. On the cost side, theoretically a child care center could look for ways to hold down its expenses, through such means as raising the staff-child ratio, offering a less enriched child development program, or similar steps. From a practical standpoint, however, few of these cost-saving options are likely to be implemented. For example, on the staffing ratio question, as one article described it, "... an infant-care staff member has more to do all day--and more responsibility--than a new parent caring for triplets." -25 As a result, there would appear to be limited opportunity to cut the payroll of child care centers. Similarly, while a center could limit its services to baby-sitting type activities (without the educational aspects of a child development program), this would not meet the quality expectations of many parents or the accreditation standards established by the National Academy of Early Childhood Programs. As a result, it would appear that the affordability of child care is most likely to be affected by what happens on the revenue side of the equation -- sliding scale tuitions, scholarships funded by charitable donations, or employer subsidy. In our questionnaire, we asked agencies how, if at all, they made the cost of their onsite child care centers more affordable for lower salaried employees. The most common answer was "Scholarships," which 13 agencies said they used. On the other hand, five agencies indicated that "Fees are not made more affordable." Government Subsidies for Onsite Child Care Centers: In contrast to Federal civilian employees, Federal military personnel have more generous child care benefits offered to them, in terms of both availability and cost. The above-mentioned benefits news- letter, for example, noted that: ...there are more than 600 child care centers at more than 400 [military] installations at home and abroad serving more than 95,000 children. In addition, military personnel average only $50 per week for the use of these centers because, in addition to providing space, the military subsidizes 30 percent of its centers' operating costs. -26 Since the Government is already subsidizing the operating costs of child care centers serving the armed forces, we sought to understand whether the military's policy might have any precedent value for the Federal civilian workforce. According to a General Accounting Office (GAO) report on military child care: "DOD provides child care to service members because it believes that this maintains their readiness, increases productivity, and improves morale. DOD also believes that military families often face special problems. For example, because military families are required to move periodically, they usually (1) cannot rely on extended family help in caring for their children and (2) do not have the support of an established neighborhood. In addition, DOD has stated that private sector child care often is unavailable, too expensive, and not of the type needed by service members because of their unusual working hours, which can include night and weekend duty. ... "The military supports child care by (1) paying for child development center construction and renovation, (2) subsidizing about one-third of the total operating costs for the centers, and (3) providing for the oversight of family day care homes." -27 General Accounting Office While some of the child care problems affecting the military are unique, much of DOD's rationale also seems applicable to the Federal civilian workforce. Moreover, on the civilian side, agencies compete for good employees with private sector firms who are increasingly offering child care benefits. In light of this, it would appear that the military example could have some precedent value for the Government's civilian workforce. To the extent that civilian managers are reluctant to embrace the business necessity of subsidizing child care, part of their hesitation may be traceable to the lack of an explicit Congressional endorsement of such action. While understandable, this cautious approach may be more restrictive than necessary, given that Congress has never said "Don't subsidize child care." To the contrary, where Congress' will has been explicitly stated, it was to endorse subsidized space for child care centers (i.e., the Trible amendment). On the other hand, Federal managers do not have unlimited budgets; any decision to provide a service, especially one which could be as costly as subsidizing more of the operating expenses of child care centers, must be made in the light of management priorities and available resources. The point here is not to mandate subsidized child care centers for all civilian employees, but rather to encourage agencies to look at their recruiting and retention needs. Having done so, agencies should be able to make informed decisions about what will help them best accomplish their missions in an efficient and effective manner. If agencies find merit in pursuing further subsidies for child care centers beyond those specifically authorized in the Trible amendment, they may find an unpublished decision by GAO dating back to 1976 to be of interest. -28 It discussed the propriety of providing subsidies for space design, renovation, supplies, and equipment for a child care center at GAO, and held that GAO could lawfully provide rent-free space to an onsite day care center despite the fact that no legislation specifically authorized such a subsidy (this was prior to the Trible amendment). More specifically, the decision stated that GAO, and by extension any agency, had the authority to provide the above mentioned subsidies to onsite day care centers as long as the agency head factually determined that the operation of such centers was necessary to recruit or retain staff, or to maintain morale and productivity. In reaching its conclusion, the GAO general counsel recognized the sensitivity of the matter at issue. Accordingly, he suggested that Congress ought to be informed of an agency's intentions to use funds in this way, even though there was no legal requirement for such notice. Since the above GAO decision was unpublished, it is not directly citable as a precedent. Moreover, the specific expenses talked about in the GAO decision have since been officially sanctioned for payment by agencies under the Trible amendment. How- ever, its more generic reasoning appears consistent with current fiscal operating procedures for Government agencies (i.e., in general, agencies spend appropriated funds for expenses which are necessary or incident to carrying out the stated purpose of their appropriations, unless the expenditure is specifically prohibited by other laws, rules, regulations, or requirements). It should also be noted that, in a later treatment of child care issues, GAO issued a report in February 1986 entitled "Child Care--Employer Assistance for Private Sector and Federal Employees." This report referenced the 1976 GAO decision discussed above and reaffirmed its conclusions. It also raised (but did not conclusively settle) the question of whether agencies could subsidize other ongoing expenses of operating a child care center beyond those discussed in the 1976 decision. Specifically, the report said: ... the Comptroller General has not ruled on whether appropriated funds are available to pay other operating expenses of day care centers in the absence of specific statutory authorization. Also section 5536, Title 5, United States Code, prohibits a federal employee from receiving compensation or perquisites beyond those fixed by statute or regulation, unless specifically authorized by law and specifically appropriated for that purpose. Thus, depending upon how the day care assistance is provided, a question could arise concerning whether such assistance would constitute additional pay or allowance for the employee/parent under 5 U.S.C. 5536. -29 As may be evident from the above carefully-worded quotation, this is a sensitive question without solidly established precedents for civilian agencies to rely on. It would appear that if an agency finds that the operation of a child care center is necessary to recruit or retain staff, or to maintain morale and hence productivity, a basis may exist under which the center's expenses could be subsidized. However, at this time, such an action would clearly be a judgment call by agency management. Given that the armed services have determined that such subsidies further their military mission accomplishment, and such expenditures have been officially sanctioned, all agencies should certainly consider whether their civilian missions would be enhanced by providing more affordable child care benefits to their civilian employees. If they find this would be the case, agencies may wish to work with OPM (or other agencies, as appropriate), in order to secure more definitive accreditation of such agency actions (e.g., initiating demonstration projects, securing precedent rulings from GAO, or proposing legislation to Congress).