Senate Banking, Housing and Urban Affairs Committee


Hearing on S.2178, "The Childrens Development Commission Act"


Prepared Testimony of the Honorable Carolyn B. Maloney (D-NY)
Member of Congress

11:00 a.m., Tuesday, October 6, 1998


Mr. Chairman and Members of the Committee -

First of course I'd like to thank my friend and colleague Senator D'Amato for giving us this opportunity to examine a bill which I believe will bring together two very diverse communities: the banking industry and moms and dads. My thanks also to Senator Herb Kohl and Representative Baker for their leadership on "The Children's Development Commission Act" or "Kiddie Mac"- as I like to call it.

Investing in your children's future is more than putting money in a 30 year bond --It's about being there for your child. But -as a mother of two - I know you just can't always be at their sides-- so it's important for your peace of mind as well as for their well - being-to find competent, affordable child care.

Kiddie Mac works to marry financial investment with "being there" for your child.

It's a modest proposal, financially. A ten million dollar Federal investment would spur banks to invest millions more. The investment would meet a critical NEED on the part of parents and children across America.

New York State provides a good example: The Comptroller recently issued a report which concludes that by the year 2001, because of welfare-to-work programs, some 61 -thousand children will be in need of day care. Currently there is room for 28-thousand. That leaves 33 thousand children with no place to go.

Limited child care availability means parents are limited as to what jobs they can take. The lack of affordable child care severely curtails a parent's ability to take advantage of workfare. In January of this year, three thousand mothers who are on welfare were excused from work requirements because child care was simply not available. The New York Times reported that the city lacks child care for 61 percent of the children whose parents are supposed to be in workfare.

Mr. chairman, without affordable child care-- the cycle of poverty and dependence is bound to continue.

There are many individual stories of people who are trying to help. People who have the expertise In child care but they lack the money and cannot get financial institutions to invest. We'll hear one woman's story of her attempts to open a facility in Pennsylvania in a moment.

First let me explain how I hope Kiddie Mac will work to revolutionize child care the way Fannie Mae and Freddie Mac have revolutionized home ownership. They have used the free market to make owning a home more accessible. That is exactly how Kiddie Mac will work to make quality affordable child care - a reality.

This is how it will work. If a person wishes to open, build or rehabilitate a child care facility, the individual would go to a bank to apply for a loan. Historically, banks have been reluctant to lend to child care providers for various reasons. Some cite the low cashflow, but I believe some reluctance lies in the banks' simple lack of experience in the child care industry.

Kiddie Mac sets up a process, where the bank would then go through with an application and submit it to a commission. The Commission would make certain that the loan met both financial and quality standards, with the facility attaining any local licensing. It would then authorize HUD to issue a guaranty to the bank for the loan -- thereby reducing some of the risk to the bank, making it more willing to lend.

In Maryland there is a similar program for child care loans with both a guarantee component and a Direct Loan program. Their Day Care Financing Program has been operating since 1985 and has provided over $15 million in financing assistance to 195 facilities.

Almost 10,000 child care slots have benefitted from these programs. Most impressively, since its creation, NOclaims have been made against the guarantee fund.

Kiddie Mac also has a small loan component. It also will work to give child care providers greater access to affordable liability insurance, often a major barrier for those who want to build facilities.

Kiddie Mac isn't the whole solution, but it does address a major part of the supply problem in child care. It will also create a place in the government which will focus on the issues and problems surrounding child care.

In the Washington Post Judy Mann wrote a column about Kiddie Mac. She described Kiddie Mac as an "imaginative and low-cost proposal" which could "expand the nation's supply of child care." As Ms Mann says at the end of her column, "Good child care is an investment in everyone's future. "

Thank you.


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