Kentucky is sacrificing its workforce to lack of affordable child care, lawmakers say

By Kentucky Lantern Staff

What happens when a promotion and small pay-raise effectively impose an $18,000 penalty on a working parent?

It’s not only a hardship on the affected family but also makes it hard for employers — not to mention the state of Kentucky — to build a workforce, according to findings by Kentucky lawmakers who have been studying what’s known as the “benefits cliff.”

Even a small increase in income can trigger the loss of child-care subsidies and other assistance such as Medicaid and food stamps, pushing the family off the “benefits cliff” and making it unaffordable for the parent to work.

“Employers report that workers are hesitant to accept wage increases, offers for additional paid hours, or a transition from part-time employment to full-time employment due to fears of how higher income could affect their eligibility for public assistance programs,” according to findings recently approved by the legislature’s Benefits Cliff Task Force.

“The reluctance of workers to advance in their careers creates significant staffing challenges for employers, particularly during periods of exceptional labor market tightness like what Kentucky has been experiencing since the onset of the COVID-19 pandemic.

“Equally troubling, the benefits cliff limits upward mobility and traps Kentucky families in cycles of poverty and government dependence,” said the report.

The workforce challenges can’t be solved without increasing access to child care and early learning programs, the task force concluded. 

“For a family with two children in Kentucky, a marginal increase in income can result in the loss of Child Care Assistance Program (CCAP) benefits causing the family to experience a benefit cliff of approximately $1,500 per month or $18,000 a year.” 

The group issued seven modest recommendations for the 2023 General  Assembly, including calling on Congress to give states more flexibility to address the benefits cliff. The federal government sets many of the income limits for assistance programs. 

Kentucky also will need more money to replace federal funding that has allowed “several significant changes” that are softening the impact of child-care costs on working parents. That funding came through coronavirus relief legislation and the American Rescue Plan Act and expires in mid-2024. 

The task force did not say how much money would be needed to replace the expiring federal aid, but did say, “the Cabinet for Health and Family Services reports that maintaining the elimination of copayments alone could cost the state approximately $18 million per year.”