As one of a series of reports concerning state policies and practices in child care and early education, this report identifies reductions in state investments in child care, early education, and school-age care and argues that such reductions will result in many low-income working families losing the assistance they need to stay employed. The report describes states' responses to budget crises with potential impact on low-income working families, such as: implementing more restrictive eligibility requirements for child care assistance; reducing provider payments; increasing parent fees; reducing investments in program licensing and monitoring; reducing support for infant/toddler programs; reducing funding for prekindergarten programs; and reducing availability of school-age care programs. The report argues that child care and early education investments are critical in the effort to help families move from welfare to work and to help low-income parents stay employed and thereby have a beneficial economic impact on states and communities. The report maintains that the George W. Bush Administration's proposed budget for block grants weakens and cuts a range of essential childrens services including Head Start, Medicaid, child care, education and training, nutrition assistance, and youth services. Concluding the report is a table delineating for each state and the District of Columbia whether the entity has a waiting list for child care subsidies or has stopped accepting subsidy applications. The table also describes budget cuts already in place and proposed budget cuts. Information for this analysis was obtained through surveys and interviews with state child care administrators and advocates. A list of the board of directors of the Childrens Defense Fund is appended. (Contains 36 footnotes.) (KB)