A huge chunk of pandemic relief funds that have kept child care programs afloat for the past few years is set to run out on Saturday. Supporters of the policy say the economic fallout will be profound, with a knock-on effect that will lower labor participation and consumer spending at a time when the country is still trying to avoid a recession.
Parents have struggled to afford child care and child care providers have struggled to retain staff since 2020. But the pandemic has accelerated many of the industry’s problems, and without federal money, many would have closed their doors.
Now some of that money is disappearing. American Rescue Plan Act stabilization funds — $24 billion Funds distributed by states that authorized child care for 9.6 million children — will run out on September 30. According to A Century Foundation analysis of the impact of losing that funding says Arkansas, Montana, Utah, Virginia, Washington, West Virginia and the District of Columbia can expect to see their child care programs cut in half or more as a result. The end of that funding would cost states $10.6 billion in economic activity, according to the TCF report, due to lost tax and business revenue that results from reduced productivity and staff turnover.
States will have to eliminate another $13.5 billion — provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Coronavirus Response and Relief Supplemental Appropriations Act that funded block grants for child care and development — to the same dateMeanwhile, $15 billion in increased funding for the Child Care Development Block Grant expires in September 2024.
The House passed a legislative package in 2021 that would expand the Child Care Development Block Grant to cover many more families, providing them with universal pre-kindergarten and reliable child care, as Congress approved relief funds to address immediate problems for families and child care providers. But $400 billion to address long-term child care issues did not advance through the Senate.
“We have this temporary funding in this context where we thought that once the temporary funding ended, we would have a system that we were building. We still need that system. Just because it didn’t happen doesn’t mean it’s not necessary. It just means that politics got in the way,” said Julie Kashen, senior fellow and director of women’s economic justice at The Century Foundation.
Karen Schulman, director of state child care policy at the National Women’s Law Center, said the relief funds, which are set to expire in 2024, also served multiple purposes to keep child care centers afloat. Additional American Rescue Plan Act Child Care and Development Block Grant funds were used for a variety of purposes.
“They also use some of that funding for quality improvement, which could include a range of activities, whether it’s professional development, whether it’s wage supplements for child care providers, whether it’s training, whether it’s licensing, health and safety — just a range of initiatives to help providers,” she said. “That money supplemented the existing Child Care and Development Block Grant program, which is very important to families but has always been very underfunded.”
Demand for childcare, competition for workers
Shona Lamond, executive director of the Downtown Children’s Center in St. Louis, Missouri, said she has used every grant she can find to keep her center open. “Federal [Paycheck Protection Program]American Rescue Plan Act [funds] … I applied for everything we were eligible for, and in most cases we got the grants I applied for to assist us,” she said.
Lamond said the nonprofit has used most of the ARPA money on the center’s biggest expense — teacher salaries. It has raised salaries over the past few years to keep up with inflation and remain competitive, with an 8% boost over the past three years.
“I think it’s really hard to compete with these other places, these big corporations that have the ability to pay $17 or $18 an hour…” Lamond said. “I don’t blame people for people who are finishing their education. We do really hard work… It’s stressful. It’s a lot of responsibility, and if you don’t do it right, you can lose your license and your livelihood, and they’re paid very little.”
Lamond said the centre is still understaffed and two classrooms have been closed for more than a year.
“We’ve had low enrollment since almost the beginning of COVID. We’ve never gotten back to our normal capacity,” she said.
Charles Gascon, a senior economist at the Federal Reserve Bank of St. Louis, said that because daycare workers were more exposed to COVID-19 and it took time for daycares to adjust to varying social distancing requirements and maintaining capacity, many workers left.
“Political position played a role, but the fact is these were not very desirable jobs in the middle of a pandemic, and the wages did not compensate workers for the extra risk they were taking,” he said.
Gascon said many of the challenges in child care today are the same ones we faced in 2019.
“In some cases, it may be a bit more intense because older people are leaving the workforce, so there are shortages in the sector, as there are in other sectors. The labour market has recovered really quickly, so there is demand for care,” he said. “… Now we can add to that a number of compounding factors: first, the population that is having children now is larger than the demographics of about 10 years ago, which means there are likely to be more people who will require these types of services. We’ve also seen a change in where jobs are, so we’re seeing higher rates of female participation in the labour force.”
The lack of affordable childcare options is leading more families to consider informal childcare that doesn’t necessarily have an educational component, Lamond said. In addition to families turning to grandparents and neighbors, and babysitting while they work remotely, she said she’s seen people connecting through local Facebook groups to find parents who come in with good references to watch their children.
“As long as your child is safe and really well-cared for and loved, sometimes that’s the best thing you can do to be able to go to work,” Lamond said.
She added that she regularly works with families who have to make tough decisions about whether to take a novel job or stay home because they cannot afford child care.
Katherine Gallagher Robbins, a senior researcher at the Partnership for Women and Families, said the end of the funding is bad news for women’s labor force participation, consumer spending and the economy as a whole. Women between the ages of 25 and 54 have played the biggest role in boosting overall labor force participation in the economic recovery, according to data from Brookings in August. analysisBut Gallagher Robbins says this is still significantly lower than in countries with better care support.
“…It is clear that women’s participation in the labour market will deteriorate,” she said.
And this in turn will impact consumer spending, she added.
“As the supply of child care decreases, it’s very likely that families will face higher costs,” Gallagher Robbins said. “That will lead to less disposable income for other necessities. And for some families, the balance will tip and a parent may have to leave the workforce altogether, which will lower income in both the short and long term. I suspect that these effects will be greatest for low-income Black and Latino families, for whom child care is already the least affordable.”
He also argues that by increasing the supply of labor by offering policies that support care, the government could curb inflation without trying to frigid the labor market.
Congressional advocates and state leaders push for better funding
Legislation introduced in the U.S. Senate this year to address these issues has not passed, but some senators continue to call for increased child care funding. U.S. Senators Bernie Sanders (I-VT) and Patty Murray (D-WA) released report in May to draw attention to the child care funding gap. Murray reintroduced comprehensive child care legislation in April.
Democrats push to extend child care subsidy program
Senator Tina Smith (D-MN) and co-sponsor of the Expanding Childcare in Rural America Act of 2023 told States Newsroom over the summer, “The entire child care business model in this country is broken—not for families, not for companies, not for providers themselves. Addressing the child care divide that is looming across our country will require a significant federal investment in child care so that our children, their parents, and our economy can reach their full potential.”
The Biden administration has taken steps this year to improve access to child care and stabilize the industry. The Department of Health and Human Services has proposed a rule announced July 11 would cap child care subsidies at 7% of family income, encourage states to accept online applications from families seeking access to the Child Care Development Block Grant and make timely payments to child care providers participating in those block grants to stabilize child care operations. The rule would also make it clear to states that they should consider siblings of children already receiving subsidies to be eligible for the Child Care Development Block Grant.
On July 19, White House officials met with more than 90 state legislative leaders and child advocates to discuss ways to address the financial needs of According to White House.
Kashen said New Mexico and Maine are among the states that benefit the most from these funds, but the states need federal assist. Maine has provided that The 7,000 child care workers receive $200 stipends but are using state funds to make those stipends lasting. New Mexico has allocated $77 million to a program to fund pay raises for about 16,000 child care workers.
“There are states that are really taking the lead here,” Kashen said. “That said, when you talk to advocates in those states, they will tell you that this is not enough money. … This is an emergency and Congress needs to do something and invest money quickly because I think we are going to lose manpower.”
