New State Laws Lessen “Cliff Effect” on Low-Income Working Families

Losing Ground: The Cliff Effect from Rocky Mountain PBS on Vimeo.

View the full-length version here: https://vimeo.com/68246853

Gov. John Hickenlooper has signed two bills into law to make it easier for low-income working families trying to advance economically to get promotions or go to school without losing their day-care assistance.

The legislation addresses problems highlighted in a Rocky Mountain PBS I-News documentary, The Cliff Effect, on the Colorado Child Care Assistance Program.

The first bill would provide funding for counties to launch pilot programs to ease families off day-care assistance subsidies when they approach the income limits, rather than sudden termination.

Under the old rules, families can lose thousands of dollars a year in child care subsidies, plunging deeper into financial distress, if they get a small raise that puts them even marginally above the income limit. This phenomenon is called the cliff effect by reform advocates.

 Colorado’s system of empowering each county to set income eligibility limits for child care benefits is unique. Recent changes by the state legislature addressed some of these issues.

Data from the Colorado Department of Human Services / I-News

Colorado’s system of empowering each county to set income eligibility limits for child care benefits is unique. Recent changes by the state legislature addressed some of these issues..News

As a result, studies have shown that low-income parents have turned down raises and promotions in order to keep the subsidies.

The law will set aside $1.2 million for counties to help up to 500 children get phased out of the subsidy program rather than cut off abruptly as their parents earn more money.

The second bill addresses problems caused by the fact that, in Colorado, counties determine who is eligible for the subsidies, not the state.  Colorado is the only state in the U.S. that uses the county system.

As a result, income eligibility levels vary dramatically by county. And recipients in some counties were allowed to use the subsidies to attend college, while families in others were not.

Among other provisions, the bill makes residents in all counties eligible for the assistance if they attend college or a work training program.

It also requires counties to provide the subsidy to all families who earn up to 165 percent of the federal poverty level, or about $32,500 per year for a family of three. Under the previous system, 12 counties in the state set eligibility limits below 165 percent and as low as 130 percent of poverty, the bottom line established by the federal government.

The bill also streamlined the application process and increased reimbursements to day-care providers for holidays and days children are absent.

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