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Federal aid cuts worsen New York City budget woes

End to federal stimulus leaves city budget short of funds for child care and other services

Cuts to child care programs in Mayor Bloomberg’s proposed budget, affecting services for thousands of city children, are dominating this year’s spending fight between the mayor and City Council. But while the mayor has taken heat for his proposed $150 million in reductions, an important force behind the scenes are cuts in federal funding to New York City that have hit child care particularly hard.

This year’s city budget anticipates a $205 million drop in federal social service funding over last year, including a projected $16 million decline to Head Start and another $14 million for the Child Care Block Grant.

Driving those declines is the expiration of federal stimulus funds, which had contributed up to $28 million a year for child care alone over the last three fiscal years. Meanwhile, Head Start funding remains uncertain because New York City’s Administration for Children’s Services is among the 132 local agencies that must reapply to the U.S. Department of Health and Human Services for the program after failing to meet so-called quality thresholds.

“We are confident that we will not lose the majority of the $190 million we currently receive,” ACS Commissioner Ron Richter told the City Council at a March budget hearing. “Our technical deficiency had nothing to do with the quality of New York City’s Head Start programs.”

The cuts and uncertainty at the federal level have forced the city to spend more — or cut back.


“Any decrease at the federal and state level inevitably impacts how much New York City can help children and families,” said Katherine Eckstein, director of public policy at the Children’s Aid Society. “It doesn’t mean, however, that New York City can turn it back on the neediest children and families.”

The city’s after-school program, called Out of School Time — slated for significant cuts in next year’s mayoral budget — is financed almost exclusively through the city’s own tax collections. But other child care programs depend heavily on state and federal aid in order to function. Reductions to federal grants force the city to rely more heavily on its own funds to pay for child care, shrinking the resources available for after-school programs.

The mayor’s signature new early childhood initiative, EarlyLearn, is being financed through a blend of funding streams that include the Child Care Block Grant and Head Start, as well as state, city and private support.

As of January, more than 115,000 children were enrolled in city-subsidized child care. Approximately 18,500 are in Head Start with the rest relying on spots financed with the federal Child Care Block Grant. Although the city also contributes funds for child care, the federal funds account for the majority of the city’s child care spending — about 60 cents out of every dollar, according to the city’s Independent Budget Office.

But Washington has been an increasingly unreliable source of funding. On the whole, New York State receives about 72 cents back for every dollar residents pay in federal taxes, Mother Jones calculated last year. The federal stimulus funds are now gone. Next fiscal year, the city will receive $458.5 million from the Child Care Block grant, which is down from $472.3 million in 2012 and $479 million in 2011.

Meanwhile, surplus funds that the city has used from the Temporary Assistance to Needy Families welfare program block grant have also dwindled, because the surplus is a thing of the past: the grant has never increased since Congress created it in 1996, which means that its value has shrunk by more than one-quarter as a result of inflation.

“You have this double whammy of federal money not growing and the city money shrinking because the city is trouble,” said Paul Lapotto, an analyst at the New York City Independent Budget Office.

And those aren’t the only federal funding cuts and freezes hitting the city’s budget. Community Development Block Grants from the U.S. Department of Housing and Urban Development are expected to take a major dip, from $255 million this year to $226 in the next budget. The city is sharing in the pain of an across-the-board 11.6 percent funding cut by Congress for the community development grants last year. The program has shrunk by nearly 40 percent in the last seven years.

In New York City, $77 million of the Community Development Block Grant went this year to housing code enforcement and emergency repair programs. But funds are used for other purposes too, including adult literacy programs, which received $2.5 million this year, homeless services ($4 million) and the GreenThumb community garden program.

“All of these programs are competing with each other,” said Harold Shultz, a senior fellow at the Citizens Housing and Planning Council who was formerly an attorney with the city Department of Housing Preservation and Development, responsible for ensuring buildings remained in good repair.

Some in Congress continue to press for drastic cuts to federal grants to states and cities. Last month, the House Ways and Means Committee vote to eliminate the $2 billion Social Services Block Grant program.

According to the Center on Budget and Policy Priorities, about 23 million people nationwide – half of them children – use programs funded by the social services block grant. In New York State, the block grant funds everything from domestic violence programs to the state’s own child care funding. New York City received $64.8 million from the grant in fiscal year 2011.

Indivar Dutta-Gupta, a policy advisor at the Center for Budget and Policy Priorities, said the very nature of these programs hinted at why they have become easy targets for proposed budget cuts. 

“Frankly the way that some of these programs work,” he said, “there’s not a very strong organized constituency to defend them.”

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