Child-care providers were hit hard by the COVID-19 pandemic. As operating restrictions hiked costs, early learning centers began losing money. The result: Over the past three years, 16,000 child-care operators shut down. To stem closures, Congress provided the sector with over $37 billion in funding. However, this funding is set to expire on Sept. 30, potentially denying care to over 3 million children.
More than 220,000 child-care providers received federal pandemic aid. In a recent survey, one-third of them said a subsidy cutoff would lead to permanent closure. Among providers that remain open, the loss of federal funding may reduce staff pay. Lower salaries will increase the current shortage of child-care workers and reduce the number of child-care slots.
In an ideal world, Congress would make pandemic-era child-care stabilization funding permanent. However, considering the political winds as well as high federal deficits, these expensive federal solutions are unlikely. Therefore, bridging the child-care funding cliff becomes a challenge for states, local governments and businesses. The good news is that innovative strategies are available.
The research landscape has confirmed that child care, done right, promotes better child development. For women’s careers, research has also demonstrated how career interruptions have major lifetime earnings costs. Because the brunt of care falls on women, providing better support for child care can improve gender equity while promoting overall economic growth.
Realistically, high-quality child care will likely always have costs that rise faster than overall inflation. Some parents can afford higher child-care tuition. But many, especially those with lower-paying jobs or who are in school themselves, cannot. Spreading the child-care burden more widely would support the idea that all of society has an interest in the career prospects of women and the future of our country’s children.
States and local governments will need to step up to mitigate the impact of the upcoming child-care cliff. Here are some of the strategies already being put in place by innovators:
Permanently fund initiatives that started with COVID-19 recovery resources. New Mexico, for example, used a ballot measure to make access to early childhood education a state constitutional right. Its state legislators then made child care free for nearly all families by tapping the state’s sovereign wealth fund that generates income from oil and gas extraction on public land. Vermont also recently passed a child-care bill that provides long-term, sustainable public funding from the general fund, along with a 0.44 percent payroll tax to make child care more affordable and raise compensation for early-childhood educators.
Expand tax credits to help families with child-care costs and create incentives for child-care workers. Expansion of the federal Child and Dependent Care Credit at the state level could reduce parents’ out-of-pocket costs. States could also provide specialized tax credits to child-care workers to increase their take-home pay. Colorado, for example, has used money from its general fund to create an Early Childhood Educator Income Tax Credit for credentialed workers who earn below a certain income threshold. Oregon lawmakers have proposed a tax credit to encourage child-care workers to take jobs in rural areas.
Provide additional funding to pay child-care workers higher wages and offer benefits. The Maine Legislature unanimously passed a bill that would use general fund money to double a wage subsidy for child-care workers, from $200 a month to $400. Similarly, Wisconsin’s REWARD program provides graduated stipends of between $250 and $950 every six months for child-care workers at licensed early learning centers. The district of Columbia’s recently created HealthCare4ChildCare program provides free health insurance to district residents who work in licensed early learning centers.
Remove barriers to starting child-care businesses. Michigan created the Our Strong Start program to guide entrepreneurs through the process of starting a child-care business: becoming licensed, creating a business plan and applying for grants. Local governments can promote child-care businesses through similar programs or by helping centers to find appropriate sites. Zoning changes can also make sites available for early learning centers. In some states, local governments can use tax increment financing for child-care worker training.
Employers should step up, motivated by a tight labor market. Some businesses can make child care more accessible for their employees by allowing workers flexible schedules and providing on-site day care. Programs like Michigan’s Tri-Share enable businesses to split the costs of child care for a company’s employees with both the state and their workers.
Businesses can also use their platforms to advocate for public support for the child-care system as a means of boosting competitiveness. After all, ensuring affordable, accessible and dependable child care after the federal financial spigot closes can be a key contributor to building prosperity for all.