This paper examines child day care needs and ways that federal and state approaches to day care standard setting and enforcement might be improved. Chapter I documents the magnitude of child day care needs, citing Department of Labor, Census, and other survey statistics on the numbers of children needing day care and the number of day care centers and homes in operation. Chapter II reviews the history of state regulation of out-of-home child day care from the 1800's to the present. Chapter III analyzes the current status of center and family day care home regulation. Chapter IV presents survey statistics demonstrating the existence of quality problems in day care facilities. Chapter V outlines four basic problems in current state and local licensing practices and offers recommendations as to how these problems might be alleviated. The four problem areas scrutinized are: (1) interrelationships of agencies involved, (2) acquiring, training, and retaining qualified licensing staff, (3) uniform administration of regulatory standards, and (4) fairness in rule making. Chapter VI calls for federal legislation and increased federal funding to improve day care program quality and discusses what the role of the federal and state governments in day care licensing should be. Appendix A probes the legality of federal participation in the day care regulatory process. Appendix B explores alternatives to current licensing approaches including the substitution of registration for licensing and the development of a network of family day care homes linked to central service centers. (JMB)