BOSTON (State House News Service) – The state’s child care subsidy system “falls short” of a goal to help parents with lower incomes find and hold down jobs, in the process “delaying and disrupting” children and families from accessing the services they need, a new report concluded.

Taking aim at a “complicated and inefficient” facet of the early education and care sector, authors with the Massachusetts Taxpayers Foundation said both voucher and reserved slot subsidies leave major gaps that fail to cover all eligible children, as evidenced by the roughly 16,000 kids who remained on subsidy waitlists in February 2022.

The newest report published Wednesday focuses on reforms that lawmakers and new Gov. Maura Healey could pursue to improve subsidy access, building on the organization’s 2022 research that estimated inadequate child care access more broadly costs Massachusetts $2.7 billion per year in lost wages, productivity slowdowns and replacement costs, and foregone state tax revenue.

“The subsidized child care system in Massachusetts is complicated and inefficient. The result of a state-federal partnership, it serves three different eligible populations with two different forms of subsidies and uses multiple funding streams,” MTF wrote. “While some of the complexities within the system are due to the nature of non-entitlement programs, outdated policies play a major role in the system’s challenges. These complications create inefficiencies in the system that lead to lagging enrollment numbers, financially unstable providers, and disruptions and delays in care for families.”

Massachusetts offers child care subsidies in two main forms: as vouchers, which eligible families can use at any provider that accepts them, and as reserved spots at specific providers set at affordable rates. Families can qualify based on their income — typically 50 percent or less of the state median income, though they can then remain eligible if their income rises no higher than 85 percent of that threshold — or via involvement with the Department of Transitional Assistance or Department of Children and Families.

About half of all licensed providers accept subsidies, according to MTF’s report, and those subsidies are funded through a combination of state and federal dollars. But federal funding has long been insufficient, the report said, pointing to past research that found only a fraction of eligible children were served.

Relief packages during the COVID-19 pandemic steered tranches of new financial aid to states, and much of that went toward stabilizing providers rather than funding subsidies.

“While state investment has increased drastically in recent years, the additional purchasing power has not translated to more children being served overall, leaving families and employers without a system that meets their needs,” authors wrote. “In addition to pandemic-induced labor shortages and a decline in the overall supply of child care, challenges related to the efficient use of vouchers and contracts are one of the main reasons why more children are not served through these programs.”

The report called for changes to how Massachusetts pays for child care, declaring bluntly that “the current method for establishing reimbursement rates is not working,” with greater focus on determining rates “solely based on provider costs.”

Authors also said an early priority for Healey and the Legislature should be restructuring the way the state procures contracted slots that will be guaranteed for subsidized families, warning that the existing system “leads to underutilization of crucial resources.”

Another option they floated is examining ways to centralize or automate much of the administrative work that regional child care resource and referral agencies, or CCRRs, perform to process families and link them to care. Under their current administrative workload burden, those agencies find it “difficult for them to provide essential services — outreach, education, and provider and family engagement,” the report said.

“Additionally, one of the largest challenges faced by CCRRs is a lack of data. CCRRs do not have the ability to understand if the subsidized providers in their region have slots available,” authors wrote. “This results in CCRRs being unable to appropriately support families who need it, transferring the burden onto them. Additional investment should be made to update current data systems or invest in entirely new ones that better serve CCRRs and therefore families and their providers.”

Child care looms as an issue area primed for debate in the 2023-2024 lawmaking session, the first featuring Healey in the corner office.

Healey targeted the topic as an early priority in her inaugural speech, calling for Massachusetts to “pledge to be the first state to solve the child care crisis” and referencing the Common Start proposal she endorsed on the campaign trail, which would eliminate child care costs for the lowest-income families, limit those costs to no more than 7 percent of income for other families, and increase early educator pay.

“Let’s finally pass legislation in line with Common Start to make sure every family pays what they can afford and that care workers are paid what they deserve,” she said. “This is something our families, workers and businesses all agree on.”

Buoying the chances of action, both House Speaker Ron Mariano and Senate President Karen Spilka highlighted child care as early priorities.

“Momentum for child care reform is as high as it’s been since the creation of the EEC over 15 years ago and improving the subsidy system to make efficient use of current resources is an important step in developing a more affordable and accessible child care system,” according to the report.

In the closing weeks of formal sessions for the 2021-2022 term, the Senate in July approved a sweeping early education and child care bill seeking increased subsidies, higher pay and worker benefits, and permanent grants for providers. The House did not advance the measure to a vote by the time formal business wrapped up on Aug. 1.