Could This Be A Turning Point For The Industry? States Have Never Had This Much Money For Child Care

Biden’s American Rescue Plan allocated $39 billion for child care — a historic infusion. But states are relying on small staffs, old systems and a short timeline to get the money out equitably.

Chabeli Carrazana

Originally published by The 19th

This story was supported by the Solutions Journalism Network, a nonprofit organization dedicated to rigorous and compelling reporting about responses to social problems. 

When it was passed in March, President Joe Biden’s American Rescue Plan included the single largest allocation for child care in the nation’s history: $39 billion. That’s more money than the United States has spent on child care in the past five years combined.

The aid was disbursed to states and tribes in mid-April, and earlier this month, the administration released its guidance for how it hopes they will use part of the money. The aid comes in the form of one-time funds, but with a larger expectation that the money could set in motion long-term change. The opportunities are vast — but so are the challenges.

Combined with the billions in child care aid already included in earlier stimulus packages, states and tribes are looking at a degree of funding that could transform child care industries that have been neglected for decades, but they’ll have to do it with small departments and outdated systems. They will also have to focus on reaching people who have never qualified or been helped by child care dollars, a particular challenge that is beyond the scope of what agencies have done in the past.

“It is more money than the states have ever received for child care — multiples more than they’ve ever received before — and it is a big undertaking, especially if you are thinking about reaching more children, more families, more providers who may not have a relationship with the states at all,” said Mario Cardona, the chief of policy and practice at Child Care Aware, a national child care advocacy organization.

Already, states have started to work through the problem using the $25 billion allocated through the stimulus package passed in December. Many waived co-payments for low-income parents who receive subsidies to help pay for care, bringing the cost down to $0 for many. Others gave bonuses to workers to help providers retain them, or allocated funds to get better protective equipment into centers. In many places, it helped stave off full closures.

But the industry, gutted by the pandemic, is far from operating at full capacity, and even when it gets back to pre-pandemic levels, the past year has made it clear over and over again that status quo isn’t enough.

One in seven child care jobs have disappeared since the beginning of 2020 — decimating a workforce that is 95 percent women. As of December, an estimated one in four child care centers have remained closed since the pandemic began, according to a study by a nationwide child care management software provider. And even as more centers have reopened, most are operating at lower enrollment, meaning most are barely earning enough to stay open. For parents, the loss of access to child care has pushed hundreds of thousands of mothers, especially, to leave jobs to care for their children. Some don’t know when they’ll return, and the economic recovery is sputtering without that workforce.

The case has been made for investing in child care, but the solution looks less like renovating an industry and more like rebuilding it from the ground up.

Susan Gale Perry, the chief deputy secretary for opportunity and well-being at North Carolina’s Department of Health and Human Services, one of the statewide agencies that is looking at this problem every day, put it like this: “I don’t like to call it a broken system because it’s a system that was never made whole in the first place.”

She sees the new money as an opportunity to do many of the things that should have been done decades ago, but the question confronting agencies now is whether lofty aspirations of change can even be met in a short time frame and, critically, what’s at stake if they’re not?

The American Rescue Plan bolstered child care funding through two pots of money. The first was a $15 billion expansion of supplemental funds for the Child Care and Development Block Grant, the typical avenue through which providers receive federal aid. The second was a $24 billion entirely new program offering child care stabilization grants.

The grants, which were distributed to states and tribes based on a formula that takes into account the number of children under 5 and per capita income, are designed to rebuild the supply of child care back to where it was before coronavirus. They are also exceedingly flexible, allowing for investments in other areas, like wages for child care workers, facility improvements and mental health assistance for educators.

But the timeline to get it done is tight.

States and tribes have until December to craft a plan, get contracts in place and obligate half of the stabilization grant funding — $12 billion of the $24 billion pot. In about two dozen states, legislatures will also have to approve the use of funds before anything is finalized. All of the money should be spent by September 2023.

“The states are under a lot of pressure between May and December to move a lot of this money. It’s very aggressive for the amount of money in there — that’s roughly $12 billion you’ve got to move in seven months,” said Linda Smith, the director of the Bipartisan Policy Center’s early childhood development initiative and a former deputy assistant secretary for early childhood development at the U.S. Department of Health and Human Services.

The intent is to get money to the providers that so desperately need it, Smith said, but it opens other questions about how an infusion of funds in a short period of time can leave disadvantaged communities behind.

Already, about half of all child care programs serve fewer than 50 children, and interest in even smaller mom-and-pop operators has grown in the pandemic as parents have sought out more intimate, and thus controlled, environments. Many of those operators, Smith said, don’t have sophisticated teams or systems to seek out funds or apply for grants, which they would have to do to tap into the stabilization money.

They may not even be on states’ radars because databases are incomplete or divided among various state agencies.

“The smaller the programs are, the harder it’s going to be for them to come in,” Smith said.

How well states succeed at reaching those providers is going to determine how equitable the program ultimately is. According to the guidance by the Biden administration, states and tribes are strongly encouraged to prioritize mom and pop child care programs and smaller centers in the roll out, opening applications to those groups first, for example. It also directs agencies to consider directing additional money toward providers serving children whose parents work non-traditional hours, kids with disabilities, children living in child care deserts or those from low-income families.

Critically, the administration is calling for an application process that is as simple as possible in order to remove barriers for those who have perhaps never applied for grant funding in the past. Applications should also be available in multiple languages, and state and tribal agencies should partner with culturally relevant organizations to help support providers through the application process, the administration said. Agencies are encouraged to set up hotlines or chats to help.

“To their credit, [the administration is] trying to make sure that this doesn’t get bogged down. There’s always a need to be prudent with government funds … but they also tried to make sure that it was the least cumbersome by pretty much telling the states: ‘Don’t make this too hard,’” Smith said.

States like Oregon have already been thinking about reaching underserved communities with the money.

Alyssa Chatterjee, the acting director for Oregon’s early learning division, said that in the previous round of funding, when Oregon got about $104 million, additional aid was earmarked for providers in “opportunity zones” — census tracts with high or concentrated levels of poverty or racially isolated areas.

“We’re continuing to look at that practice,” Chatterjee said. “We really wanted to make sure that we’re supporting our providers who are serving or providing services for our communities who have been historically underserved — families in poverty or communities of color — and making sure that they don’t lose access to quality, affordable, consistent child care right in their community.”

That also means understanding what those providers, many of them smaller operators, need.

It’s thinking about: “Not everyone has a bank account, so how do we get them the money?” Chatterjee said.

North Carolina also wants to use the money in the American Rescue Plan to build on the work it did earlier in the year: trying to give smaller providers in communities of color additional support. The state has an over-reliance on center-based care, Perry said, but many parents want more in-home care options. The plan now is to build out network connections between home care providers to help them share business practices.

“That’s often a barrier for small family child care homes — it’s very difficult to do your own accounting and marketing and take care of children all day,”  Perry at North Carolina’s Department of Health and Human Services said. “[We are going to offer] some shared business support, some technical assistance and a network so that they have each other to talk to because it can also be a very isolating job.”

It’s a system that was never made whole in the first place

Susan Gale Perry, chief deputy secretary for opportunity and well-being at North Carolina’s Department of Health and Human Services

The other piece of the equation is trying to make child care a more sustainable business model by both paying workers more and requiring parents to pay less.

Because of ratios set by states and tribes around how much staff there needs to be per child — usually 1 adult for every 4 infants, about 1 to 8 for toddlers — the majority of expenses at child care centers are eaten up by payroll demands. But that workforce, in turn, is often paid little more than minimum wage because profits are so thin.

That’s why support for the workforce is key, something most states are prioritizing in the roll out of American Rescue Plan funds.

“There is no world where we have a system of high quality care that doesn’t fully invest in the workforce in the form of adequate compensation, in the form of paid family and medical leave, in the form of benefits,” said Cardona of Child Care Aware. “Unless you make those investments, you’re not going to see the kinds of returns that you want.”

Earlier in the year, many states offered bonuses to child care workers who worked during the pandemic. Georgia, for instance, sent 65,000 teachers and child care workers $1,000 each.

Now, states are looking at how best to support the workforce while taking into account that this is a short-term infusion. Beyond pay, states and tribes are considering how they can use the money to build out other benefits.

In North Carolina, the state is working with community colleges to develop apprenticeship programs for child care, building the pipeline of future providers. It also wants to expand a program statewide that offers supplemental wages to child care workers who continue with their early childhood education.

North Carolina, Arkansas and others also set up mental health hotlines for child care workers who stayed at work through the pandemic — another kind of support system that could be set up or expanded with the one-time funds.

“I’ve seen a couple states saying, ‘We’re going to launch an early childhood mental health consultation system or we’re going to build training for that,’” said Helene Stebbins, the executive director of the Alliance for Early Success, a group that brings together early childhood advocacy at the state level. “It turns out we sort of know how to support it and we know that in general the early childhood workforce hasn’t been well supported.”

Something like mental health support could lower turnover rates at child care centers — as high as 40 percent in some states — and boost retention, which leads to better outcomes for children. The Biden administration has also clarified that this should be a top focus. Providers who get the American Rescue Plan funds cannot lower wages or benefits for workers during the period in which they are receiving a grant, and they should not furlough them, the administration said in its guidance.

For parents, providers are also working to bring down cost by continuing to waive copayments and using the money to provide tuition assistance to low-income families, essential workers and others.

In Oregon, waiving the copays was one of the first things the state did with prior funding. Now, with the American Rescue Plan dollars, it’s looking at how it can use the new infusion to completely revise its copay structure so that parents aren’t left with a sizable bill, including beyond the life of the grant money.

As states finalize their plans over the next few months, a broader conversation is also starting about the depths to which child care has been underfunded in the past and how those existing problems could hinder the success of the American Rescue Plan rollout.

In Georgia, Amy Jacobs, the commissioner of the department of early care and learning, said the state never had the money to collect detailed data on providers and their needs. Without that, it’s been hard to pinpoint whether the choices the state is making about where to put its new child care dollars are the right ones.

“It would be a really heavy lift to collect that type of data, and we’ve never done it in the past,” Jacobs said. “We know anecdotally they operate on razor-thin margins, they’re having a hard time getting the workforce, and it’s really, really expensive and parents can’t afford it. Those are the problems, but we don’t know the magnitude.”

In the meantime, the state is trying to get creative by requiring providers to provide data when they receive grants, including through the previous rounds of aid, in order to better craft its plan with this latest investment.

Still, it feels like a massive undertaking, Jacobs said. In a regular year, the state may get about $370 million in child care aid. Between the various packages, it’s received about $2 billion in child care funding over the past 12 months — more than five times the usual amount.

“It’s a humongous opportunity that we don’t want to miss, and we don’t want to make a misstep,” Jacobs said. “It’s also a little overwhelming for me and my staff just because we are also dealing with one-time money. This is going to go away and we have to think through what’s the best way to make an impact.”

Recognizing that challenge, the Biden administration is directing states to use up to 10 percent of their stabilization dollars, 20 percent for tribes, on administrative needs, supply building and technical assistance.

“These funds represent an unprecedented opportunity that will be difficult to realize without adequate staffing and system support at the state, territory and tribal levels,” the administration said in its guidance.

Reporting requirements are also forthcoming. Those requirements have not been finalized, but the administration is hoping to collect data on where and to whom the stabilization grants are going, and that will likely include gathering data on the race, ethnicity and gender of the child care providers.

What Stebbins, of the Alliance for Early Success, is encouraging states to do is think big.

“The opportunity is 100 percent  to reimagine, to break out and can we overcome short-term thinking at the state level or at the government level to really step back and do that?” she said.

It’ll also be an exercise in creativity. With the various pots of money, there are different opportunities for states to use the funding to institute almost any solution they see fit. And that means creating opportunities beyond what states are used to offering, Smith said.

“What I’ve been saying when I’ve talked to different government agencies is, ‘Look at these pieces like pieces of a puzzle. How can you put them together to really rethink some of it?’ That’s the way you’ve got to look at this money — not just each individual piece because that will keep you from doing anything  that’s very forward-thinking, long-term fixes to this system,” Smith said. “This has been something we would never, ever have imagined.”