The CCDF is the primary federal program specifically devoted to providing families with child care subsidy and funding supports to states to improve quality. The CCDF is jointly financed by federal and state governments and consists of three funding streams: mandatory, matching, and discretionary funds.

Mandatory and matching funds were enacted by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and are appropriated under Section 418 of the Social Security Act (42 U.S.C. 618).

PRWORA repealed the old welfare-related child care programs provided under the Social Security Act: Aid to Families with Dependent Children (AFDC), Job Opportunities and Basic Skills (JOBS) Child Care, Transitional Child Care, and At-Risk Child Care. PRWORA also required that the new mandatory and matching funds be transferred to state Lead Agencies as the Child Care and Development Block Grant (CCDBG) and be administered by these agencies, using the provisions of the CCDBG Act as amended.

The amounts of mandatory and matching funds appropriated for CCDF are governed by Section 418 of the Social Security Act (as opposed to the CCDBG Act) and were not changed by the CCDBG Act. Note: While the funding mechanism for mandatory and matching funds is separate from discretionary CCDBG funding, PRWORA made discretionary funding subject to the requirements of the CCDBG Act, as amended. The U.S. Department of Health and Human Services (HHS) subsequently designated the combined funding streams as the CCDF program.

To access matching funds, states must provide a share of the matching funds (based on the prevailing Federal Medical Assistance Percentages rate) and spend at their required maintenance of effort (MOE) level.

Each state’s MOE level is based on the federal share of its funding for the now-repealed AFDC-linked child care programs. The share is based on federal funds received in FY 1994, FY 1995, or an average of funds received in FY 1992–1994, whichever is greater.