SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Child Care Quality Incentive Act of 
2003''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress makes the following findings:
            (1) Recent research on early brain development reveals that 
        much of a child's growth is determined by early learning and 
        nurturing care. Research also shows that quality early care and 
        education leads to increased cognitive abilities, positive 
        classroom learning behavior, increased likelihood of long-term 
        school success, and greater likelihood of long-term economic 
        and social self-sufficiency.
            (2) Each day an estimated 13,000,000 children, including 
        6,000,000 infants and toddlers, spend some part of their day in 
        child care. However, a study in 4 States found that only 1 in 7 
        child care centers provide care that promotes healthy 
        development, while 1 in 8 child care centers provide care that 
        threatens the safety and health of children.
            (3) Full-day child care can cost $4,000 to $12,000 per 
        year.
            (4) Although Federal assistance is available for child 
        care, funding is severely limited. Even with Federal subsidies, 
        many families cannot afford child care. For families with young 
        children and a monthly income under $1,200, the cost of child 
        care typically consumes 25 percent of their income.
            (5) Payment (or reimbursement) rates, which determine the 
        maximum the State will reimburse a child care provider for the 
        care of a child who receives a subsidy, are too low to ensure 
        that quality care is accessible to all families.
            (6) Low payment rates directly affect the kind of care 
        children get and whether families can find quality child care 
        in their communities. In many instances, low payment rates 
        force child care providers serving low-income children to cut 
        corners in ways that impact the quality of care for the 
        children, including reducing the number of staff, eliminating 
        professional development opportunities, and cutting enriching 
        educational activities and services.
            (7) Children in low-quality child care are more likely to 
        have delayed reading and language skills, and display more 
        aggression toward other children and adults.
            (8) Increased payment rates lead to higher quality child 
        care as child care providers are able to attract and retain 
        qualified staff, provide salary increases and professional 
        training, maintain a safe and healthy environment, and purchase 
        basic supplies, children's literature, and developmentally 
        appropriate educational materials.
    (b) Purpose.--The purpose of this Act is to improve the quality of, 
and access to, child care by increasing child care payment rates.

SEC. 3. PAYMENT RATES.

    Section 658E(c)(4) of the Child Care and Development Block Grant 
Act of 1990 (42 U.S.C. 9858c(c)(4)) is amended--
            (1) by redesignating subparagraph (B) as subparagraph (C);
            (2) in subparagraph (A), by striking ``to comparable child 
        care services'' and inserting ``to child care services that are 
        comparable (in terms of quality and types of services provided) 
        to child care services''; and
            (3) by inserting after subparagraph (A) the following:
                    ``(B) Payment rates.--
                            ``(i) Surveys.--In order to provide the 
                        certification described in subparagraph (A), 
                        the State shall conduct statistically valid and 
                        reliable market rate surveys (that reflect 
                        variations in the cost of child care services 
                        by locality), in accordance with such 
                        methodology standards as the Secretary shall 
                        issue. The State shall conduct the surveys not 
                        less often than at 2-year intervals, and use 
                        the results of such surveys to implement, not 
                        later than 1 year after conducting each survey, 
                        payment rates described in subparagraph (A) 
                        that ensure equal access to comparable services 
                        as required by subparagraph (A).
                            ``(ii) Cost of living adjustments.--The 
                        State shall adjust the payment rates at 
                        intervals between such surveys to reflect 
                        increases in the cost of living, in such manner 
                        as the Secretary may specify.
                            ``(iii) Rates for different ages and types 
                        of care.--The State shall ensure that the 
                        payment rates reflect variations in the cost of 
                        providing child care services for children of 
                        different ages and providing different types of 
                        care.
                            ``(iv) Public dissemination.--The State 
                        shall, not later than 30 days after the 
                        completion of each survey described in clause 
                        (i), make the results of the survey widely 
                        available through public means, including 
                        posting the results on the Internet.''.

SEC. 4. INCENTIVE GRANTS TO IMPROVE THE QUALITY OF CHILD CARE.

    (a) Funding.--Section 658B of the Child Care and Development Block 
Grant Act of 1990 (42 U.S.C. 9858) is amended--
            (1) by striking ``There'' and inserting the following:
    ``(a) Authorization of Appropriations.--There'';
            (2) in subsection (a), by inserting ``(other than section 
        658H)'' after ``this subchapter''; and
            (3) by adding at the end the following:
    ``(b) Appropriation of Funds for Grants To Improve the Quality of 
Child Care.--Out of any funds in the Treasury that are not otherwise 
appropriated, there is authorized to be appropriated and there is 
appropriated $500,000,000 for each of fiscal years 2004 through 2008, 
for the purpose of making grants under section 658H.''.
    (b) Use of Block Grant Funds.--Section 658E(c)(3) of the Child Care 
and Development Block Grant Act of 1990 (42 U.S.C. 9858c(c)(3)) is 
amended--
            (1) in subparagraph (B), by striking ``under this 
        subchapter'' and inserting ``under this subchapter (other than 
        section 658B(b))''; and
            (2) in subparagraph (D), by inserting ``(other than section 
        658H)'' after ``under this subchapter''.
    (c) Establishment of Program.--Section 658G of the Child Care and 
Development Block Grant Act of 1990 (42 U.S.C. 9858e) is amended by 
inserting ``(other than section 658H)'' after ``this subchapter''.
    (d) Grants To Improve the Quality of Child Care.--The Child Care 
and Development Block Grant Act of 1990 (42 U.S.C. 9858 et seq.) is 
amended by inserting after section 658G the following:

``SEC. 658H. GRANTS TO IMPROVE THE QUALITY OF CHILD CARE.

    ``(a) Authority.--
            ``(1) In general.--The Secretary shall use the amount 
        appropriated under section 658B(b) for a fiscal year to make 
        grants to eligible States, and Indian tribes and tribal 
        organizations, in accordance with this section.
            ``(2) Annual payments.--The Secretary shall make an annual 
        payment for such a grant to each eligible State, and for Indian 
        tribes and tribal organizations, out of the corresponding 
        payment or allotment made under subsections (a), (b), and (e) 
        of section 658O from the amount appropriated under section 
        658B(b).
    ``(b) Eligible States.--
            ``(1) In general.--In this section, the term `eligible 
        State' means a State that--
                    ``(A) has conducted a statistically valid survey of 
                the market rates for child care services in the State 
                within the 2 years preceding the date of the submission 
                of an application under paragraph (2); and
                    ``(B) submits an application in accordance with 
                paragraph (2).
            ``(2) Application.--
                    ``(A) In general.--To be eligible to receive a 
                grant under this section, a State shall submit an 
                application to the Secretary at such time, in such 
                manner, and accompanied by such information, in 
                addition to the information required under subparagraph 
                (B), as the Secretary may require.
                    ``(B) Information required.--Each application 
                submitted for a grant under this section shall--
                            ``(i) detail the methodology and results of 
                        the State market rates survey conducted 
                        pursuant to paragraph (1)(A);
                            ``(ii) describe the State's plan to 
                        increase payment rates from the initial 
                        baseline determined under clause (i);
                            ``(iii) describe how the State will 
                        increase payment rates in accordance with the 
                        market survey results, for all types of child 
                        care providers who provide services for which 
                        assistance is made available under this 
                        subchapter;
                            ``(iv) describe how payment rates will be 
                        set to reflect the variations in the cost of 
                        providing care for children of different ages 
                        and different types of care;
                            ``(v) describe how the State will 
                        prioritize increasing payment rates for--
                                    ``(I) care of higher-than-average 
                                quality, such as care by accredited 
                                providers or care that includes the 
                                provision of comprehensive services;
                                    ``(II) care for children with 
                                disabilities and children served by 
                                child protective services; or
                                    ``(III) care for children in 
                                communities served by local educational 
                                agencies that have been identified 
for improvement under section 1116(c)(3) of the Elementary and 
Secondary Education Act of 1965 (20 U.S.C. 6316(c)(3));
                            ``(vi) describe the State's plan to assure 
                        that the State will make the payments on a 
                        timely basis and follow the usual and customary 
                        market practices with regard to payment for 
                        child absentee days; and
                            ``(vii) describe the State's plans for 
                        making the results of the survey widely 
                        available through public means.
            ``(3) Continuing eligibility requirement.--
                    ``(A) Second and subsequent payments.--A State 
                shall be eligible to receive a second or subsequent 
                annual payment under this section only if the Secretary 
                determines that the State has made progress, through 
                the activities assisted under this subchapter, in 
                maintaining increased payment rates.
                    ``(B) Third and subsequent payments.--A State shall 
                be eligible to receive a third or subsequent annual 
                payment under this section only if the State has 
                conducted, at least once every 2 years, an update of 
                the survey described in paragraph (1)(A).
            ``(4) Requirement of matching funds.--
                    ``(A) In general.--To be eligible to receive a 
                grant under this section, the State shall agree to make 
                available State contributions from State sources toward 
                the costs of the activities to be carried out by the 
                State pursuant to subsection (c) in an amount that is 
                not less than 20 percent of such costs.
                    ``(B) Determination of state contributions.--Such 
                State contributions shall be in cash. Amounts provided 
                by the Federal Government may not be included in 
                determining the amount of such State contributions.
    ``(c) Use of Funds.--
            ``(1) Priority use.--An eligible State that receives a 
        grant under this section shall use the funds received to 
        significantly increase the payment rate for the provision of 
        child care assistance in accordance with this subchapter up to 
        the 100th percentile of the market rate determined under the 
        market rate survey described in subsection (b)(1)(A).
            ``(2) Additional uses.--An eligible State that demonstrates 
        to the Secretary that the State has achieved a payment rate of 
        the 100th percentile of the market rate determined under the 
        market rate survey described in subsection (b)(1)(A) may use 
        funds received under a grant made under this section for any 
        other activity that the State demonstrates to the Secretary 
        will enhance the quality of child care services provided in the 
        State.
            ``(3) Supplement not supplant.--Amounts paid to a State 
        under this section shall be used to supplement and not supplant 
        other Federal, State, or local funds provided to the State 
        under this subchapter or any other provision of law.
    ``(d) Evaluations and Reports.--
            ``(1) State evaluations.--Each eligible State shall submit 
        to the Secretary, at such time and in such form and manner as 
        the Secretary may require, information regarding the State's 
        efforts to increase payment rates and the impact increased 
        payment rates are having on the quality of child care in the 
        State and the access of parents to high-quality child care in 
        the State.
            ``(2) Reports to congress.--The Secretary shall submit 
        biennial reports to Congress on the information described in 
        paragraph (1). Such reports shall include data from the 
        applications submitted under subsection (b)(2) as a baseline 
        for determining the progress of each eligible State in 
        maintaining increased payment rates.
    ``(e) Indian Tribes and Tribal Organizations.--The Secretary shall 
determine the manner in which and the extent to which the provisions of 
this section apply to Indian tribes and tribal organizations.
    ``(f) Payment Rate.--In this section, the term `payment rate' means 
the rate of reimbursement to providers for subsidized child care.''.
    (e) Payments.--Section 658J(a) of the Child Care and Development 
Block Grant Act of 1990 (42 U.S.C. 9858h(a)) is amended by inserting 
``from funds appropriated under section 658B(a)'' after ``section 
658O''.
    (f) Allotment.--Section 658O of the Child Care and Development 
Block Grant Act of 1990 (42 U.S.C. 9858m) is amended--
            (1) in subsection (b)(1), in the matter preceding 
        subparagraph (A)--
                    (A) by striking ``section 658B'' and inserting 
                ``section 658B(a)''; and
                    (B) by inserting ``and from the amounts 
                appropriated under section 658B(b) for each fiscal year 
                remaining after reservations under subsection (a),'' 
                before ``the Secretary shall allot''; and
            (2) in subsection (e)--
                    (A) in paragraph (1), by striking ``the allotment 
                under subsection (b)'' and inserting ``an allotment 
                made under subsection (b)''; and
                    (B) in paragraph (3), by inserting 
                ``corresponding'' before ``allotment''.
Child Care Quality Incentive Act of 2003 - Amends the Child Care and Development Block Grant Act of 1990 to revise requirements relating to child care payment rates.Requires States to conduct market rate surveys, at least once every two years, to determine their child care payment rates under the block grant program, including cost-of-living adjustments and consideration of variations in localities, children's ages, and types of services.Establishes a program of incentive grants to States and Indian tribes to improve the quality of, and access to, child care by increasing child care payment rates. Makes separate appropriations for such incentive grants in specified amounts for FY 2004 through FY 2008 (prohibiting use of block grant funds for such incentive grants).Authorizes the Secretary of Health and Human Services to make an annual incentive grant payment to an eligible State only if the State has conducted a statistically valid survey of the market rates for child care services in the State within the two years before it submits an application containing information on such survey and the State's plans to increase its child care payment rates. Requires an eligible State that receives such a grant to make priority use of its funds to increase significantly (up to the 100th percentile of the market rate survey) the rate of reimbursement to providers for subsidized child care (with any remaining funds to be used to improve the quality of child care services). Requires a State matching contribution of at least 20 percent of incentive grant program activity costs.
A bill to amend the Child Care and Development Block Grant Act of 1990 to provide incentive grants to improve the quality of child care.