States are trying to prop up the child care industry. It isn’t enough

State efforts to support child care providers may, at least temporarily, protect some providers from the worst effects of last month’s expiration of pandemic-related aid. Experts predict that the unraveling of a system plagued by a lack of affordability and access, low wages, staff turnover, and burnout will continue.

“The basic business model of child care, where it costs more to produce than parents can afford, is further complicated when there is a workforce gap where very few receive a reasonable pay for a demanding job,” said Linda Smith, director of the Bipartisan Policy Center think tank’s Early Childhood Initiative.

“Child care has widely been seen as a classic example of market failure,” Smith went on to say. “It’s worth understanding because it was bad before COVID, and it has gotten worse since then.”

The American Rescue Plan Act of 2021 included $24 billion in funding to help stabilize child care centers during the COVID-19 pandemic. When the pandemic disrupted many families’ child care arrangements, child care providers used the funds to keep their doors open. Some providers used it to raise wages in order to attract employees. States, tribes, and territories were also permitted to use the funds to assist low-income families and essential workers with child care costs. However, the ARPA funds ceased to flow on September 30.

In 2021, the federal government will also invest an additional $15 billion in existing child care grants to states, which will be used to assist eligible low-income working families in paying for child care. That extra cash will run out in September 2024.

According to a June report by The Century Foundation, a left-leaning think tank based in New York City, the end of ARPA funding could force the closure of more than 70,000 child care programs, leaving more than 3 million children without care. The group estimates that if parents can’t find affordable child care and decide to leave the workforce, they will lose more than $9 billion in annual earnings.

According to the report, the end of ARPA funding could reduce the number of licensed child care programs by half or more in five states: Arkansas, Montana, Utah, Virginia, and West Virginia, as well as Washington, D.C. Another 14 states could reduce the number of licensed programs by one-third.

States take action

However, in recent years, some states have increased their own investments in child care, providing a buffer against the end of federal assistance.

“Some child care will be lost in this country.” “We’ll see more turnover because wages are still lower than what any big box store retailer can offer,” Smith predicted. “But I don’t think it’s going to be this cliff where everybody falls off next week.”

For example, New York more than doubled its child care spending to $7 billion over four years last year. According to Democratic Gov. Kathy Hochul, the funds will allow the state to raise the income limit for child care subsidies to 300% of the federal poverty level (or $90,000 for a family of four), extending eligibility to more than half of the state’s young children.

In New Mexico, voters approved a constitutional amendment last November that dedicates a portion of the state’s Land Grant Permanent Fund — fees collected by the state from oil and gas development on public land — to early education and child care. The change is expected to generate $150 million in annual funding for early childhood programs. Since August, all families earning up to 400% of the federal poverty line, or $120,000 for a family of four, have been eligible for free child care.

In addition, the Washington state Supreme Court upheld in March a 7% capital gains tax approved in 2021 to fund early education, child care, and public school construction projects. The tax, which was expected to bring in $500 million per year, brought in $850 million in its first year, the state announced in May.

Washington spent the majority of its $390 million in federal child care stabilization funds to support child care providers after the pandemic, which may help the state avoid a sudden drop in services.

Even officials from some of the states identified in the Century Foundation report as the most vulnerable told Stateline that they are not on the verge of a funding crisis.

West Virginia officials said they are confident that children in the state, one-quarter of whom are poor, will continue to have access to child care subsidies. The state took $24 million from its Temporary Assistance for Needy Families (TANF) program in May to pay for the subsidies, which will last until August of next year.

Officials with the Arkansas Department of Education told Stateline that the state’s “cautious approach” to using federal pandemic aid will mitigate the impact of the program’s termination.

“Providers who applied for and received the funds were encouraged to use them to pay for one-time projects, such as improving facilities,” Kimberly Mundell, an Arkansas Department of Education spokesperson, wrote in an email. “Because of the proactive, conservative approach to distributing these funds, the expiration of funds won’t have a dramatic impact on providers in Arkansas.”

However, child care advocates believe that most, if not all, states will eventually require federal assistance.

“Some of these states, like Washington, New York, and New Mexico, are going to be in a better position because they sought to use policy to address the short-term child care crisis,” said Lauren Hipp, national director of early learning for MomsRising, an advocacy organization for women, children, and families.

“However, it’s important to note that even in those states, it’s clear that they can’t do it on their own.” Federal investment and policy are required.”

Providers reach a breaking point

Angela Gonzalez, a native of the Bronx, New York, studied early childhood education at Bronx Community College before obtaining a license for her home-based care business in 2019.

Gonzalez, on the other hand, last accepted children in February, after months of losing clients and volunteer workers. She has put her dream of becoming a licensed child care provider on hold in order to deal with the realities of paying rent in New York City, she says.

“I recently applied for a job at McDonald’s. They pay $15.00 per hour. “I also applied to a [Manhattan restaurant] and may get the job,” she explained. “Is this what I’ve spent my entire life wanting to do?” No. But I don’t see how I can care for other people’s children while also caring for myself and my children.”

BriAnne Moline, owner of the Wild Wonders Early Learning Program in Missoula, Montana, said she received $10,000 in federal funding each quarter for a total of 15 months. She used the funds to keep her skeleton crew by providing holiday bonuses and higher wages, and she even took a pay cut to do so.

However, Moline told Stateline that after receiving her last round of funding in January, all of her employees found better pay elsewhere, forcing her to reduce the number of children she serves from 12 to four. She stated that it has been difficult to find qualified child care workers to replace those who have left.

Moline now works 10- to 12-hour days at Wild Wonders, but she has to supplement her income with part-time work to support her four children.

“I can’t operate at full capacity because I don’t have staff,” she went on to say. “I can’t keep up with the cost of running a business, giving my all to these wonderful children, and the cost of living for myself and my kids.”

According to Camille Bennett, who owns and operates three child care centers in northern Alabama, black and Latina women are overrepresented in the child care workforce, which is one reason why pay is so low and the work is undervalued. Bennett claims that her state’s current child care shortage will be exacerbated by the state’s strict abortion ban. However, she hopes that the end of federal aid will serve as a catalyst for child care workers to organize.

“When that federal money dries up, and [the government] stops supplementing our income based on inflation, then you will see people take to the streets and rally because we will have no choice,” she went on to say.

This is starting to happen in some states. The California Child Care Providers United union has been rallying and marching for higher pay for months. Democratic Gov. Gavin Newsom signed a state budget with $600 million to increase subsidy rates for state-contracted providers in June. They will receive a 20% pay increase under the new two-year contract.