Divided Legislature Helps Poor Colorado Families Avoid Fiscal Cliff

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Photo: Child in classroom

A pay raise is a good thing, particularly for families struggling to pay their bills. Yet that bump in pay can have a downside. Parents may be cut off from their state funds for child care, which can amount to thousands of dollars a year.

The phenomenon is called the "cliff effect." That's what happens when a salary increase actually results in less aid from the state because of the salary caps for certain programs.

Lawmakers in Colorado took a step towards softening the cliff, by passing a bill to make the state's child care assistance program more flexible.

Specifically, the bill, which is headed to the governor to sign, expands a pilot program that allows counties to ease parents off of public assistance for child care. Currently, subsidies end completely when a recipient's income reaches a certain level.

Colorado Matters host Ryan Warner spoke with Bill Jaeger, vice president of early childhood initiatives at the Colorado Children's Campaign. He advocated for the bill.

Jaeger on how the current child care assistance program can hurt families:

"If we look, for example, in Denver, a family making $54,000 a year, a family of four, [with] each parent making maybe $13 an hour, if even one of those parents got a one dollar an hour pay raise, they would all of a sudden become ineligible for our state's child care subsidy program."

On how some families react to the prospect of losing their health insurance subsidies:

"Families oftentimes will... modify behavior: they turn down extra hours, they turn down better paying jobs, they turn down salary increases. And that's a net-negative outcome for that family, that child, and taxpayers and Colorado as a whole."

On a pilot program that shows why the bill on the governor's desk is important:

"We're already seeing that families who otherwise would've either turned down that raise or gone over that cliff [and lost a subsidy] have actually been able to move gradually, again, towards economic self-sufficiency... It's very difficult given the high cost of child care to ever say there's never going to be a cliff, but what it does do is it allows families to turn [it] into more of a hill than a steep drop off."