Senator DODD. Thank you very much, Mr. Freeman.

Just one simple question. This comes up all the time. American Express made the decision to come involved in child care-let me make a statement, and you tell me if I am right or wrong. American Express made the decision to become involved in child care because it was a good business decision.

Mr. FREEMAN. That is absolutely right. I think it sounds nice to say it is a good citizen and so forth, and it is a good citizen, but our basic motive in child care is a bottom-line business decision.

Senator DODD. Thank you. That is a point that I think gets lost all the time in this discussion. Some imagine that people are doing this because, as I have described, it is sort of a VISTA program or a Peace Corps program-a nice thing to put out in an annual report as a do-gooder kind of program. But it has proven to be a good business decision for American Express.

Mr. FREEMAN. Productivity in our company, which is like most companies, people-intensive—we don't have large manufacturing plants or patents, particularly-I mean, you have to be concerned about the productivity of people. Productivity means what are they worried about. If they are worried about child care and some of these other things I have mentioned, then it becomes a bottom-line business issue, and you have an affirmative duty to your shareholders to act in that kind of situation.

Senator DODD. And it has proven to have been a good business decision?

Mr. FREEMAN. Yes. And we are doing certain things. We will be doing more. We are trying out certain things this year, and we will try out more next year.

Senator DODD. But bottom line indicates that it is working for the corporation?

Mr. FREEMAN. Yes, very much so.

Senator DODD. Very good. I know you have got a plane to catch. We thank you for being here.

Mr. FREEMAN. Thank you.

Senator DODD. Dana, I apologize. Dana Friedman is senior research associate with the Conference Board in the city of New York. She was a keynote speaker at a series of breakfasts on child care that I organized for chief executive officers in Hartford and Stamford several years ago. That goes back to when we first tried to develop some interest in child care among some of the major corporations in my home State. I am grateful to you for coming here again today to be a part of all of this.

Dana is a child care lobbyist who began focusing on the private sector a decade ago. She has been a consultant to companies in researching their child care needs ever since, so your testimony will be of particular importance. And I am sure you found the comments of Mr. Freeman interesting. At some point, we will hear from business witnesses who don't involve themselves in child care at all and anticipate what it is going to be like for them. I think it is always revealing that sometimes those witnesses are treated equally in terms of weight-the witness who is engaged in the practice who will say something, and someone who has not yet done it, but is frightened about what it is going to be like.

So I think it is important that people understand that I have advocated and said countless times that child care is a good business decision, and in his statement, Mr. Freeman emphasized that point. To go back, Sandra, we are delighted to have you with us this morning.

All your statements will be included in the record, so proceed in any way you feel most comfortable.

Ms. SALYER. Thank you, Senator Dodd.

I am particularly happy to be here to testify on behalf of Mervyn's in support of the Act for Better Child Care Services.

As a company, Mervyn's became involved in child care through our contributions program approximately four years ago. We feel as a company that we serve four primary constitutions: our customers, our employees, our communities and our shareholders.

Unlike other companies, this issue first surfaced from our cus- ! tomers. We found that we had to manage our business differently to continue to serve our customers in the way they wanted to be served. The reason was that shopping was no longer a leisurely experience. Our customers were busy, they were time-constrained, and that was because they were working. So, child care surfaced as a major issue for our customers first, and obviously that same issue was very important for our employees.

In trying to address child care through our contributions program 4 years ago, I can best describe our efforts as haphazard at best. It was really the shotgun approach.

We have facilities in 14 States. We were trying to identify the needs in each of those communities in those States and, I think, became very, very frustrated with the process. We found that the services and child care delivery systems in our States varied dramatically, State by State, and I guess walked away feeling that we had a system-if you can call it a system-that was very fragmented and really was not doing what should be done in order to serve children and families in our country.

So for us to make any kind of difference at all with limited resources, we felt we really needed to focus our efforts. Obviously, there were some shining examples of wonderful programs, and that's where we first got started.

Over the years, our program has evolved, and we think that we are focusing both our dollars and our energies in those areas where we can make a difference. It is for this reason that we support the ABC legislation, because we feel that this bill does just that—focuses dollars and energies where they are most needed.

I guess first and foremost, ABC is a very systematic approach. I have already talked about the frustration of a fragmented system. And here, we are given an opportunity for a very systematic approach that builds an infrastructure that is absolutely critical if we are going to really address this crisis. It builds the infrastructure first by requiring States to develop their own child care plansthat is very important, and that is not happening in many of our States.

Second, it builds the State's resource and referral system. We think that this is sort of the base. You really need an R and R system in your State in order for the private sector to do anything meaningful. We have been hampered in many instances in some of

our States that didn't have a strong R and R system, so we feel that that is one of the first critical steps.

If we move from this systematic approach and infrastructure and have all of this in place, then we can really address some of the issues that come up in any conversation about child care, and that is: affordability, availability, and quality.

On the affordability side, I think most of us would agree that subsidized child care is essential if we all believe in self-sufficiency for our families. This is an area, however, where the private sector feels that they can make little dent. I mean, it is almost impossible for us to really address this issue in a leadership way. We feel that government must take the lead on affordability, and we think that ABC is the vehicle to provide that leadership.

The second issue, availability in child care. We have heard today from several of our speakers about the supply and demand situation. The gap is really unbelievable, and it is sometimes frustrating to feel that you are going to make any difference in filling that gap. But we believe this act presents a very simple approach by providing grant and loan funds to increase supply and by recruiting family day care providers.

This is an area where Mervyn's has had considerable experience. We are involved with probably one of the largest public/private partnerships in the country, the California Child Care Initiative, a partnership with American Express and other corporations and Federal, local, and State funding, in recruiting family day care providers through the Statewide resource and referral system. This is a simple approach, it is easy to implement, and it has significant results. So we applaud this in this bill.

And lastly, and for us the most important issue, is quality. After 4 years, this is where we have decided to really focus all of our energies, efforts and dollars. This is our highest priority.

Research has shown the impact of a quality child care program on our country's investment now will save us millions of dollars in later years in a bandaid approach toward education, drop-out prevention, family counseling, crime, et cetera.

We simply cannot sacrifice quality standards, and we applaud the effort in this bill.

Beyond national quality standards, the other thing that we think is critical to the quality issue is training. Again, we are investing significant dollars through our contributions program in training providers. Not only does it have a direct result on quality, but it has a direct result on cost-efficiency.

So we applaud these key elements in the bill. We think this is the first move toward resolving what we consider a crisis in our country, and we will provide strong support for this act.

Thank you very much.

Senator DODD. Thank you very much, Sandra.

Cheryl Smith, thank you for joining us.

Ms. SMITH. Thank you, Senator.

I want to thank you for inviting me here today. I am a member of a number of organizations. BPW/USA, a business and professional women's organization, is responsible for me being here today. They asked me to speak in favor of this legislation because of my experience as a child care consultant.

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I am also a member of a number of chambers of commerce, the NFIB. I was a 1986 delegate to the White House Conference on Small Business.

So I have heard both sides, the pros and cons, and belong to some groups that are not in support of this legislation. But I am here today to speak as a businessperson who is in support of the legislation.

I have carefully evaluated the different legislations that are proposed, and I support ABC because it will expand the availability of child care services by training new providers; it will elevate the wages paid to providers, resulting in higher quality care, and it will outline a means of creating standards that are uniform across the country. It encourages the expansion and formation of information and referral services where needed, and it will help a part of the population that I don't think business will ever be able to address.

I came to be involved in child care from a personal experience in that my husband and I had owned an interior design business for a number of years and were finding that we were having problems getting quality care for our 21⁄2 year-old daughter, and the people who worked for us were having problems.

Most child care centers did not meet our schedules, and we were having interrupted projects, unhappy customers, frustrated employees. And when we really got to look at what the problem was, it all boiled down to child care.

The solution for us-although we certainly were not a major, large employer like American Express, but even for a small company-the answer was to purchase a building near our studio and create a day care center for our employees.

The major product that we received from this was that we had better employees. We saw their productivity increase, and we found that other designers were wanting to come to work for us because of the child care center.

After owning this center for a number of years, it led us to the belief that if we were experiencing these kinds of successes that other employers would want to experience them, too. That led to the formation of our company, Corporate Kids.

Our slogan that we have worked with is that: Parents who worry less work more. We truly believe that it is a good business decision for employers to become involved in their employees' child care needs.

There are excellent examples around this country. One that I think is critical is the example of Nyloncraft in Indiana. Nyloncraft is a small plastics company with only 250 employees. One year, they sent out over 900 W-2 forms, which meant that they had a turnover of three times for each job. What this really meant was that they had enormous training costs as well. They instituted an onsite child care center and in 1985, had 3 percent turnover. It helped their bottom line.

What it boils down to is that child care is a money issue, and many companies assume that child care costs more than it will return to them. They anticipate problems in finding people to run their centers or to use for R and R.

Corporate Kids tries to calm these fears and show how their productivity can increase. But after three years of marketing this program, it has been very slow, but we are beginning to find success. And we are having many employers starting to really look at this issue.

But I do not think that business can do it alone, and that is part of why I am here today. It will take a partnership. It will take a commitment from the government to take an active role.

First, there are not enough quality child care providers out there to meet the needs. This must be addressed. The information and referral system is so important in our urban areas that in many ways, it doesn't affect our rural areas. This problem is very acute in part of the rural areas of this country.

Hiawatha, KS is a small community near us with about 1,000 population. There, reliable child care is not a matter of choosing which center, or who, but who you can find who can keep your child.

I feel that the ABC legislation addresses this in providing funds for the establishment of centers in these types of communities and then providing funds to train the people within the community who are going to staff them.

A second problem that many businesses do not talk about but that they think about a lot is the quality of care being offered. And again, I want to use Hiawatha as an example. They had a tragic thing happen there a year ago. One home care provider was taking care of too many children, and she put an 18 month-old and a small baby in a bathtub and then went to check on some other children. The 18 month-old turned on the scalding water. The 18 month-old was able to get out, but the baby wasn't, and it lived 6 months in a horrible existence.

The problem in Hiawatha is that parents had to take what they could find. There was no training and there was no support system, as we have heard others say.

But where this affects business is every business that uses an information and referral will think about cases like this and wonder if the quality of care that they are suggesting and referring to their employees will be quality care, or will it affect their employees' children like this child in Hiawatha.

We need to deal with the situation of standards across this country, and the ABC legislation does address this.

Another point I want to make is that many States, like my State of Kansas, are looking at welfare reform. In Kansas, our legislature just past the "KanWork Program," which is basically welfare. What it is doing is setting up job training, and during this job training it is offering vouchers for child care, and it is creating a support system there.

One of the problems I see with this is that if we can't improve the wages of the child care providers, we are going to be training people for child care positions who do not pay much better than what they are getting on welfare. And when they get off welfare, they lose their health benefits. So it is kind of a vicious circle. There has to be something to elevate those charges.

Many States that do offer support to their low-income families don't offer it at a market rate. În Kansas, our SRS pays one-third