lower-income, lower-middle income levels. It targets money where it is needed the most, and it directs the Federal effort where it ought to be directed-helping those who need the help, providing the funds to those that really need the assistance.

Thirdly, we wanted to establish the principle that we here in Washington, we at the Federal government level, should not be the ones determining the best provider of child care. Many mothers, at considerable financial sacrifice, make the choice in those critical early years to raise the children themselves or to provide for flexible arrangements. We did not want to discriminate against families that chose that option, because many child care experts had come before the Select Committee on Children, Youth and Families and said that nothing, in most instances, can substitute for a mother's care. And to the extent that we can foster that, we ought to do it. And so we came up with the principle of nondiscrimination and, hence, the tax credit approach on a refundable basis.

Finally, we incorporated the principle that as the work force begins to shrink and as pressure mounts on employers to expand benefits to attract workers, that there ought to be an incentive for the corporate sector to participate in the provision of child care. Therefore, we proposed incentives to corporations who assist in providing child care assistance, develop onsite care centers, provide referrals, and pay the freight for some of their employees.

The Coats bill attempts to incorporate these principles. The Domenici-Wallop bill also incorporates many of these principles.

My final point is, I think it's important that the Senate have before it those two options; that since there is a general consensus about the need to provide child care assistance, we should not be limited to the ABC bill as an approach. We ought to have before us two alternatives based on two different principles upon which we can debate, evaluate, and make our final determination.

I think that is the best policy. It's the best way to proceed. Only this committee can report out the tax credit approach which incorporates what I think should be the underlying principles.

I want to thank you, Mr. Chairman, and members of the committee for the opportunity to present my case for you today.

[The prepared statement of Senator Dan Coats appears in the appendix.]

The CHAIRMAN. Well, you've done a good job of presenting your point of view.

Are there questions of the Senator?

Senator MOYNIHAN. Just to reinforce your statement, it was a very persuasive statement. Do I gather, Senator, that you were on the Select Committee on the House side?

Senator COATS. Yes. I was on it from its inception and served as ranking member.

Senator MOYNIHAN. If I may say, it shows-very much to your advantage.

The CHAIRMAN. I must say I am also pleased to see him on the National Commission on Children, making a contribution there.

Senator ROCKEFELLER. Mr. Chairman, that was going to be my point, that the Senator is a valued member of the Commission on Children, and his expertise will show.

The CHAIRMAN. Thank you very much, Senator.

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Our next panel is made up of Mr. Raymond Scheppach, the Executive Director of the National Governors' Association; and Mr. Charles Hayward, Secretary of the Delaware Department of Services for Children, Youth and Their Families, representing the American Public Welfare Association.

If those two witnesses would please come forward.

Mr. Scheppach, there have been a number of comments concerning the views of Governors. We are delighted to have someone in authority speak to that. If you would proceed.

STATEMENT OF RAYMOND C. SCHEPPACH, EXECUTIVE DIRECTOR, NATIONAL GOVERNORS' ASSOCIATION, WASHINGTON, DC Mr. SCHEPPACH. Thank you, Mr. Chairman.

I appreciate the opportunity to appear before you today to discuss the Governors' views in developing effective child care legislation. I would like to submit my full statement for the record and summarize it briefly.

The CHAIRMAN. It will be taken for the record.

Mr. SCHEPPACH. The Governors believe that a national child care policy must support parents in their primary role of nurturing and caring for children. It should enable a family to choose the child care options, whether it be home or center-based, that best meets the individual needs of the family.

Quality child care is linked not only to the Nation's investment in a competitive work force for the future, but also to the productivity of its current work force.

In terms of an overall approach, the Governors believe that the Federal child care legislation must strike a balance between a tax credit and a grant program if it is to comprehensively address the issue of supply, quality and affordability. While a tax credit will help families pay for child care, a grant program will help States improve the quality, affordability and supply of that care.

The Governors believe that tax credits to help offset the costs of child care should be targeted to help low-income families maintain their economic independence. The Governors further believe that the Dependent Care Tax Credit should be retargeted by making the credit refundable and increasing its monetary value. We applaud the bill before the committee by Senators Packwood and Moynihan, which essentially makes these changes.

Further, the Governors believe that consideration should be given to the new Childrens Tax Credit included in the Bush proposal. However, the Governors believe that priority should be given to making the Dependent Care Tax Credit refundable, to help working mothers and welfare recipients who are trying to become economically self-sufficient.

In addition to a Child Care Tax Credit, the Governors believe that a grant program is critical to addressing the issue of quality, affordability and supply. The Governors support a grant program that will give States the flexibility they need to improve and expand quality child care programs.

A flexible grant program will allow Governors to build upon their existing child care systems, identify priority needs, and work to address them. It would also give States the flexibility to continue

to experiment with innovative ways to provide child care. This flexibility will ensure more efficient targeting and use of resources. While the Governors like the flexibility for States outlined in the Packwood-Moynihan grant program, they are concerned that it may direct a disproportionate share of the resources to the tax credit rather than to building a child care infrastructure in each State.

The quality and regulation of child care has been and should remain a State responsibility. Many States have enacted or upgraded child care standards in licensing procedures. Last year Árkansas, Colorado, Delaware, and New Mexico adopted annual training requirements for child care providers. Other States, including Arizona, Illinois, Minnesota, North Carolina, and New Jersey improved their regulatory systems by creating new categories for coverage of child care services.

The Federal Government should support but not supplant these State initiatives. However, not all States have the resources to establish and enforce optimal child care standards. The Federal government should work with States to improve the quality of child care. The Governors propose that the Federal government provide incentive grants to States to help improve the child care standards. Only with a national commitment to child care, including an investment from Federal, State and local levels and the private sector, will progress be made. From the Governors' perspective, investment in children is the single most important effort we can make to ensure our Nation's future economic stability.

We would like to work with this committee, as well as Senator Dodd on the ABC bill, to craft a final comprehensive bill, without Federal standards, but one which combines a grant in a tax credit approach. We look forward to working with this committee to devise that bill.

Thank you.

[The prepared statement of Mr. Scheppach appears in the appendix.]

The CHAIRMAN. Thank you very much, Mr. Scheppach.

Mr. Hayward, we are pleased to have you, and if you would proceed with your testimony.

STATEMENT OF CHARLES E. HAYWARD, SECRETARY, DELAWARE DEPARTMENT OF SERVICES FOR CHILDREN, YOUTH AND THEIR FAMILIES; TESTIFYING ON BEHALF OF THE AMERICAN PUBLIC WELFARE ASSOCIATION, WILMINGTON, DE

Mr. HAYWARD. Thank you very much, Senator. I have also submitted testimony so I will summarize.

The CHAIRMAN. That will be taken for the record.

Mr. HAYWARD. Over the past several years, there have been dozens, literally dozens of hearings on child care. This is evidence of the fact that child care has really become a national issue, a national problem. But I think because of the issues that have been addressed here, it is now time to take action. We must do something about child care.

The number of American families lacking affordable quality child care continues to grow dramatically. The changing demo

graphics of the workplace has created an increasing need for child care across the country.

Just a few quick examples to highlight what is happening in two States. These situations are, in varying degrees, happening all across the country. In 1986, Tennessee had 961,000 women employed in the State; 490,000, or 51 percent, had children aged 6 years of age or under; and another 185,000 children between 5 and 9 years of age. Yet Tennessee has just 2,216 licensed child care facilities to serve over 10,800 children. In practical terms, that means that for every one space available in preschool day care programs, there are about five children who need care.

In Delaware in 1987, there was an estimated shortage of between 18,000 and 23,000 full and part-day day care programs. There are many other statistics which are available and which have been laid out in my testimony, so I will not repeat them.

The fact is that child care is the very foundation for self-sufficiency. It is a prerequisite for a single parent who wishes to work, and it is critical in providing an enriched environment for children before they begin school and as a supplement to the regular school day. This enrichment is especially important for children whose families are economically disadvantaged, who are in single family households, or who are isolated from the broader community due to their economic standards.

In 1987, APWA called for welfare reform through an investment in poor families and their children. We outlined our plan and we are happy to say much of it was included in the final legislation. Our program entitled "One Child in Four," referred to the percentage of America's children born in poverty.

A cornerstone of our policy called for increased access and availability of affordable day care to meet the developmental needs of children and assist families working towards self-sufficiency. Many of the programs, as I stated earlier, have come about as a part of the Family Support Act. We commend Congress for its hard work and tenacity in enacting this legislation that seeks to reduce poverty among children and their families by promoting self-sufficiency. The legislation is significant for many reasons. Guaranteeing child care for AFDC recipients while they participate in the Jobs Opportunity and Basic Skills Training Program, and for the additional 12 months while transitioning into the world of work is truly historic. For the first time, Congress, the administration and this Nation recognize the critical link between work and child care.

For single parents, this link has become a necessity for economic survival. Yet, as States begin to implement the Family Support Act, they are very concerned about being able to meet what will be a tremendous demand for day care. Although the legislation requires that States guarantee child care to all AFDC-eligible recipients, it does not provide funding to increase the supply or improve the quality of existing day care.

If States cannot provide child care, AFDC recipients cannot participate in the Jobs program. This would mean that as human services administrators, we would not be able to fulfill our mandate or the aim of the Family Support Act to help families break the cycle of poverty by offering choices to achieve economic self-sufficiency through job training and educational opportunities.

We believe that without the ability to prod the market to create new slots for day care, that we as a nation may miss our opportunity break the cycle of dependency for many eager and deserving Americans.

This is why, Mr. Chairman, I am here today to encourage you to enact a comprehensive child care bill that would increase the supply, improve the quality, and provide affordable child care in communities all across the Nation. A tax credit approach alone will simply not address the fundamental crisis that faces States today.

We also need to build a sound infrastructure that balances a variety of child care needs and gives parents real choices in selecting the type of care that best meets their individual situation.

Taking into account the need for the infrastructure, we must also take a look at some other recent developments. What will the impact be of the new minimum wage which has just been passed? We will see day care providers making more money, but that will again be passed on to those who use day care. And who will be affected the most? The low-income.

The expanded Job Care Opportunities Act, S. 412, recommends a number of commendable revisions to the existing Dependent Care Tax Credit. First, by making the tax credit refundable, additional working poor families would now qualify for a credit. Many were previously unable to claim any credit because their tax liability was too low.

Second, the new funding provision that would allow families to receive the credit on a monthly basis through paychecks would put money directly into the hands of families to purchase child care. Third, families would receive more money through an increase in the credit to help offset the cost of child care.

Let me just make one or two closing statements.

The CHAIRMAN. All right. If you would summarize, Mr. Hayward, please.

Mr. HAYWARD. There has been much discussion about the ABC bill and I think that maybe I've been looking at a different bill, but I think that many of the criticisms which relate to ABC are not valid. The bill does give States a chance to look at what it is they need in their particular States to address their needs.

We at APWA agree that we should have some incentives for those States who are not up to present standard, and would hope that any bill which is passed on child care would have a combination of a tax incentive targeted for the low-income, along with many of the approaches that are outlined in the ABC bill to effect quality and affordability.

Thank you.

[The prepared statement of Mr. Hayward appears in the appendix.]

The CHAIRMAN. Mr. Scheppach, I notice in your comments you speak in favor of the Packwood-Moynihan approach with a tax credit, but you seem to feel it tilts too far in that direction rather than doing enough for the infrastructure of child care within the State.

Now, look at the realities of what we are faced with here in this committee. We are talking about possibly having a very limited