Sep 26, 2023 6 min read

What a Drop in Child Care Funding Means and What States are Doing

Leah Woodbury By: Leah Woodbury
Busy woman sends an email on her computer.
Emailing legislators about the need for child care funding is one way providers and parents can voice their support.

Pandemic-era funding relied upon by child care providers is set to expire on September 30, which means access to child care nationwide will be reduced dramatically and thousands of child care programs could close.

It’s a problem that hits child care businesses the hardest, but will have ripple effects on the economy.

“It’s going to be a big hit to working families because they’re already struggling in many places to be able to work and utilize their talents and strengths and contribute to the economy,” said Cindy Lehnhoff, director of the National Child Care Association. “And unfortunately, you’re going to have a lot of employers who are going to be struggling to find the talent they need because so many people will be taken out of the workforce because they can’t get child care.” 

Let’s take a closer look at what’s happening and what child care providers can do.

The Child Care Funding Landscape

During a good portion of the pandemic, child care providers were simultaneously grappling with lower enrollment and higher operational costs, said Radha Mohan, executive director of the Early Care and Education Consortium. 

“Parents couldn’t go to work without high quality child care, and in the middle of the pandemic, we saw a drop in maternal labor force participation that in some places really hasn’t fully recovered yet,” said Radha.

Congress invested over $50 billion dollars in the child care industry. And on September 30, 2023, a majority of this funding is about to expire – that includes $24 billion in one-time stabilization funding.

The good news is that one pot of money remains and states have until September 30, 2024, to spend an additional $15 billion through the Child Care and Development Block Grant Act,  which funds child care largely for low income families, she said.

What States Are Doing

States are being forced to consider whether to use their own dollars to continue some of the policies and programs created through the relief funds, or whether they let some of the progress lapse, said Radha.

A number of states permanently raised reimbursement rates or committed to multi-year increases. 

“That’s huge, because without high enough reimbursement rates, providers cannot participate in these programs,” she said.

These states include California, Colorado, Delaware, Georgia, Illinois, Indiana, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, Utah and Washington.

Minnesota was the first state to dedicate its own resources to continue its stabilization program, said Radha. 

The state has provided funding through 2027 through the Great Start Compensation Support Payment Program, which was signed into law in May 2023 and provides Minnesota with additional funds designed to support the child care industry and child care workers

Child care providers will be issued payments to help support other benefits for their workers. Additionally. Minnesota is working on a transition to create a new Department of Children, Youth, and Families. This new cabinet-level agency will be established in July 2024 and fully staffed by July 2025. This agency will help streamline the way they manage child care in the state, and the state also increased provider reimbursement.

Pennsylvania is another state that included funding in the final state budget. As of March 1, 2023, base rates paid to child care providers participating in Child Care Works, Pennsylvania’s subsidized child care program, were adjusted to account for inflation. The new base rates per region are available online.

Massachusetts is offering C3 grants, which are non-competitive and available for all eligible licensed child care providers. These funds are in addition to current state funding and do not replace the existing subsidy funding system. This money can be used for many purposes, including for personnel costs, benefits, professional development, curriculum and rent or mortgage payments. 

Vermont has taken a more holistic approach and overhauled its entire early education system. The state passed a new 4 4% pay payroll tax to fund a $125 million investment in child care, making Vermont the first state to mandate a withholding for child care purposes. That will begin July 1, 2024.

In New York, the governor recently signed the 2024 budget that earmarks $500 million in underused federal pandemic funds to support the state’s child care workforce. The funding will be distributed through a workforce retention grant program that will benefit an estimated 150,000 caregivers by providing $2,300 to $3,000 bonuses for existing employees and funding for recruitment strategies, including sign-on bonuses for new employees and other related expenses.

What Child Care Providers Can Do

“All lawmakers across the board, regardless of political affiliation, care about the economy,” Radha said. “We can make the connection between child care and the economy for them. Then they start to take an interest in the issue when they may not naturally have been inclined to do so.”

She suggested inviting your local legislator to tour your program so they can see firsthand how important your business is. Ask each child to tell the legislator what his or her parent does for work to illustrate the jobs your business supports.

“A child will say, ‘my mom’s a teacher, my dad’s a lawyer.’ Someone else is a firefighter, a state administrator. And suddenly the legislator begins to understand that if it weren’t for your business, none of these other people could participate in the economy,” Radha said. “And that is so powerful, especially when that message is delivered through a young child, and they see the benefit of early education playing out in front of them.”

Join your state child care association, the ECEC, your local Chamber of Commerce or other groups that are advocating for policies.

And write letters! Legislators keep track of how many letters they receive on a topic. Make phone calls as well.

“Supporting child care means that you’re supporting local economies, businesses and  families,” she said.

To learn more, listen to the Child Care Business Podcast episode, “Billions in Child Care Funding is About to Dry Up: What that Means for Providers and Families,” in which Cindy Lehnhoff shares more about funding and tips for providers.

Each state has a primary agency or organization responsible for subsidizing child care programs through federal and state grants, and there are many others including CCR&Rs, shared services organizations, ECE community leaders and regional NAEYC affiliates that offer child care programs and services to help you provide sustainable child care programs. Check out this state-by-state list from Procare Solutions to see what resources are available to help fund your programs.

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Leah Woodbury

Leah Woodbury is the head of content at Procare Solutions. Her job includes writing about topics that matter to child care professionals and finding ways to help them do their important work. She’s a mom of two who loves getting updates about what her preschooler is doing during the day via the Procare child care mobile app!

Leah Woodbury