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Children and Families -- TANF and Economic Support Programs (Paper #211) Page 3 Cost to Continue 100% FPL Copayment Waiver 4. Low-income families are not in a similar position to more affluent families in the child care market with respect to the treatment of child care costs under the tax code. Low-income families are limited in their ability to use the child care and dependent tax credit because they typically have little or no income tax liability that could be offset with the credit. Waiving copays for the low-income families could be a way to provide for more equitable access to child care. 5. CCDF rule guidance permits, and encourages, states to waive copayments for low- income families to make child care more affordable and accessible. Previously, ACF permitted copayment waivers for up to 100% of the FPL. ACF issued new guidance in 2024 allowing states to waive copayments for families with incomes up to 150% of the FPL. 6. DCF indicates that in response to the guidance issued by ACF, DCF used its authority under current law to implement, beginning November, 2024, a waiver of copayments for participating families with income at or below 100% of the FPL at an annualized cost of $6,530,000 FED. For a family of three in 2025, 100% of the FPL is $26,650. 7. Because the implementation of the copayment waiver date does not align with the state fiscal year, only eight months of the annual cost ($4,353,300 FED) are included into the adjusted base for the 2025-27 budget. 8. SB 45/AB 50 would provide $2,176,700 FED annually to support the full annualized cost of continuing the policy to waive copayments for families with income below 100% of the FPL. The Committee could decide to approve the funding provided under SB 45/AB 50 to continue the full-year cost of the 100% FPL copayment waiver [Alternative A1]. 9. On the other hand, federal guidance does not require a waiver of copayments. Thus, the Committee could decide that the same concerns could be addressed via smaller changes in DCF's copayment schedule, which under current law already limits the costs for such families. Further, to the extent these families have taxable income, some of them may be able to use the child care and dependent credit to claim a portion of child care costs to reduce their tax liability. 10. Thus, the Committee could instead decide that it is unnecessary to implement a waiver for families with income less than 100% of the FPL and require DCF to rescind its current policy of waiving copays for families with incomes of less than 100% of the FPL [Alternative A2]. This alternative would reduce funding by $4,353,300 FED annually for the costs already in the base budget for copayment waiver policy. 11. Alternatively, the Committee could maintain the base amount of funding to reduce the copays, rather than waive them completely, for families with income below 100% of the FPL [Alternative A3]. DCF would take the current level of funding into account when creating its copayment schedule.