A new report says the number of low-income working families who receive child-care subsidies from the New York City government is on the decline.

The report, which was released by the Institute for Children, Poverty, and Homelessness, shows that the city has shifted child care funding away from working families and toward families receiving public assistance.

Why the shift? According to Ralph da Costa Nunez, the group's president and CEO, the city was forced to ramp up subsidies for families on public assistance in order to comply with a federal mandate.

While there's nothing wrong with that, Nunez said he has a problem with where the money's coming from.

"While it's good to give slots to people who receive public assistance," he said, "if you're taking slots away from low-income working people, they're going to end up in a homeless shelter -- or on public assistance."

While some working families can afford to pay for child care on their own, that's rarely true of the thousands of working families who qualify for those subsidies. To be eligible, you have to have an income below 200 percent of the poverty level, which is $37,060 for three people -- say, a mother with two children.

There are nearly 665,000 such families in the city, the report says, and they include more than half of all city children 6 years and under. Yet only a fraction of these families actually receive those benefits.

Citing "rising costs and shrinking budgets," the report found that the city has decided to "effectively cut access to child care for more than 567,000 already-struggling families and will force many of them deeper into poverty."

Asked how the city might rectify the problem, Da Costa Nunez offered some advice to Mayor Michael Bloomberg. "Stop building bike lanes and start building day care for kids. Stop spending all this money on a campaign against soda and everything else and start spending money for kids. It's a matter of priorities."

A city spokesman pointed out that the administration is about to invest $1 billion toward improving the quality of the child care system.

Child care advocates once saw Bloomberg as a major ally, a national leader in the fight for affordable child care. But in the past few years the mayor has allowed the city's child care budget to shrink. As the report points out, the total number of children receiving subsidies through the New York City Administration for Children's Services peaked at 116,355 in 2006. Since then, it has dropped to 94,794.

Betty Holcomb, the policy director for the Center for Children's Initiatives, said she thought the situation was actually bleaker than the report suggests. Thousands of families earn just above the 200 percent mark, making them ineligible for subsidies, she said. But that doesn't mean they can afford child care on their own.

"We've been concerned for the longest time that it's hard for low income and middle class families to get any kind of help," she said.

She added that she recently spoke to a woman who turned off the electricity in her apartment so she could pay her child care bill. "She used candles to keep her apartment lit," she said.

Other parents may be tempted by a different strategy. "What we hear is, 'I'll just get public assistance,'" she said. "That's not an easy path either."