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Insurance premiums have increased significantly in the past and may increase in the future because of market conditions in the insurance business generally, conditions in the child care industry more particularly or KLC's situation specifically. KLC cannot be certain of the cost or coverage it will obtain with replacements of existing policies, which will depend on the factors described above. 6.1.16 Factors beyond the Company’s control, such as economic conditions, may adversely affect the demand for child care services Demand for child care services is subject to fluctuations in general econemic conditions, and the Company's revenues depend, in part, on the number of working mothers and working single parents who require child care services. Recessionary pressure on the economy, and a consequent reduction in the general labor force, may adversely impact the Company because out-of-work parents tend to stop using child care services. In addition, certain demographic trends which are favorable to the Company's business, including the increasing percentage of mothers in the workforce and the growth in population of children of the age needing child care, as well as trends in the preference of working parents and employers for center based child care, may not continue. Other factors beyond the Company's control could adversely affect demand, such as terrorism, natural disasters and epidemics. Children attending KLC’s facilities are generally enrolled on a weekly basis. Accordingly, any change in economic conditions or other external factors affecting demand will impact us more quickly than businesses with longer contractual periods. 6.1.17 Aloss or reduction of government funding for child care assistance programs or food reimbursement programs could adversely affect KLC Federal and state child care assistance programs accounted for approximately 20% of KLC's revenues during the one year period ended December 31, 2005. These funds are primarily from the Child Care and Development Block Grant and At Risk Programs, which are designed to assist low-income families with child care expenses and are administered through various state agencies. Although additional funding for child care may be available for low income families as part of welfare reform and the reauthorization of the Child Care and Development Block Grant and At Risk Programs, KLC may not benefit from any such additional funding. KLC is eligible to participate in the Child and Adult Care Food Program, or CACFP, which provides reimbursement for meals and snacks that meet certain USDA approved nutritional guidelines. Centers can qualify to participate in the CACFP by meeting one of two tests: 25% or more of the enrolled students receive child care assistance funding or 25% or more of the center's customers have household incomes that are at or below state specified Income levels. Reimbursement is calculated based on the percentage of the center's customers thai fall into a "free" or "reduced" income category established by the state. Federal or state child care assistance programs may not continue to be funded at current levels, particularly with large budget deficits putting pressure on discretionary spending programs. In addition, many states have recently experienced fiscal problems and have reduced or may in the future reduce spending on social services. A termination or reduction in funding of child care assistance programs could have a material adverse effect on KLC's business. Adverse changes to the national or local economies may result in an increase in the number of families eligible for child care assistance. In order to compensate for such increases, state or iocal governments have in the past, and may in the future, increased parent co-payments required under such programs or change the eligibility requirements to reduce the number of families eligible to participate in such programs. An increase in the required parent co-payments may discourage parents from sending their children to KLC's centers. An increase in required parent co-payments also increases KLC's exposure to the risk of non-payment by these parents. In addition, states which reduce funding for child care may be unable to qualify to receive funds under the Temporary Assistance for Needy Families, or TANF, program. Such states may utilize funds under the 51 HOUSE_OVERSIGHT_024484