Elaine Thompson/AP Photo
Amy McCoy serves lunch to preschoolers at her Forever Young Daycare facility, October 25, 2021, in Mountlake Terrace, Washington.
For Julie Clark, who runs the CAST Preschool and Childcare Center in Woodbury, Connecticut, the pandemic has “been an expensive time.” The center serves 150 children from ages six weeks to five years, as well as 50 before- and after-school students. Clark’s program closed for four months in early 2020, and when omicron hit this winter, she had to close down classrooms as children and staff got sick. She decided not to charge parents during the closures but still paid her teachers to keep everyone happy. “It was not good for my finances,” she said.
Clark explained that she’s still in business because of government aid. First, she got two rounds of funding through the Paycheck Protection Program, which helped small businesses retain employees during the pandemic. Then, she received a grant of about $130,000 from her state thanks to the American Rescue Plan, passed by Democrats early in President Biden’s term. She puts $3,000 of that grant every payroll period toward increased compensation for her staff. It’s particularly important right now, so that she can hold onto employees in a hot labor market and get ahead of her state’s minimum wage rising to $14 an hour this summer.
Clark’s grant is part of $39 billion in funding that the ARP sent to the child care sector in stabilization grants to keep programs from going under. The money has done precisely what it promised, keeping providers’ doors open and children enrolled. But it also did something else: It served as a test run for what it would look like if the federal government decided to make a substantial, ongoing investment in child care and early-childhood education. And it proved that such an investment would work.
It’s unclear if more money is coming. Talks over a reconciliation legislative package that Democrats could pass without Republican support are only just restarting after conservative Democratic Sen. Joe Manchin walked away from negotiations at the end of last year. So far, Manchin has said he’s focused on prescription drug and tax reform to raise revenue for investments in energy. He has lumped everything else—including child care and early-childhood education investments—into a far less urgent bucket.
The tragic part of this is that, without far more federal funding, the child care sector is still at risk of catastrophic closures. If Congress doesn’t send it more money soon, the consequences for parents and providers will be dire—and the hard work put into creating a successful, working model of federal child care investment through the ARP grants will disappear.
IN HIS BUILD BACK BETTER agenda, President Joe Biden originally included money for heavily subsidized child care and free, universal preschool for all three- and four-year-olds. That money would have been routed through the states, requiring all of them to opt in and spend it according to federal guidelines. Given that 12 Republican-controlled states still have refused to expand Medicaid under the Affordable Care Act despite the federal government picking up most of the cost, some analysts reasonably feared that they would similarly snub a federal influx of funding directed at expanding and improving child care.
But it didn’t happen with the ARP funding. States could have refused the money, telling the federal government they wouldn’t be able to use it, or failing to get authorization from legislators and governors to actually spend it. “Folks were wondering, ‘Would they leave money on the table?’” said Lauren Hogan, managing director at the National Association for the Education of Young Children. In Idaho, for example, it wasn’t clear at first whether the legislature would greenlight the money, particularly after state lawmakers shot down a $6 million federal grant for early-childhood education a few months prior, after one lawmaker objected to “any bill that makes it easier or more convenient for mothers to come out of the home.”
But in the end, “they all ended up taking the money,” said Stephanie Schmit, director of child care and early education at the Center for Law and Social Policy. In Idaho, the $222 million in child care funding it got through ARP was authorized without any members of the legislature speaking against it.
“The fact that all 50 states are participating shows the degree to which this never became a political football,” said Gene Sperling, who is overseeing the implementation of the ARP for the White House.
Advocates couldn’t recall any state legislatures where approving the funding became a heated battle. In calls with every state governor about the rollout of ARP funds, Sperling said few politicized the child care money.
On top of that, many states, controlled by both Democrats and Republicans, are putting the ARP child care funds toward the kinds of investments that Democrats had envisioned in the original Build Back Better package. “There’s some pretty good decisions being made across red states, blue states,” Schmit said. “I don’t think there’s really a delineation.”
The industry still faces all of the problems it did before the pandemic, plus the extra stresses of the crisis and the current tight labor market.
For example, Georgia, Kansas, Louisiana, and Nebraska expanded eligibility so that subsidies reach more families. In Georgia, they will reach 10,000 more children. Kansas also reduced families’ co-payments and waived them for essential workers. North Carolina covered all co-payments through the end of 2021 and invested in moving parents off its wait list for subsidies, and Texas provided a year of free child care to low-income service sector workers, while investing in quality improvements for existing providers and increasing supply in child care deserts. Tennessee offered more money for providers who met quality benchmarks. Louisiana also switched from paying providers only for the time that children attend to paying based on enrollment, which offers more stability, and has also increased reimbursement rates to cover the real cost of care, rather than just what providers are currently charging.
“That tells us there is an opening for additional resources that support those kind of policy changes,” said Anne Hedgepeth, deputy chief of policy at Child Care Aware of America.
ARP grants have gone a long way toward keeping the sector stable and preventing closures. An analysis by Rasheed Malik, director of early-childhood policy at the Center for American Progress, and Century Foundation Senior Fellow Julie Kashen found that the grants kept 75,000 providers from permanently closing, preventing 70 percent of losses projected at the start of the pandemic. “It really did what it was meant to do,” Malik said.
But the money will run out. All of the child care–related funding has to be spent by September 2024. The industry still faces all of the problems it did before the pandemic, plus the extra stresses of the crisis and the current tight labor market, including huge difficulties in attracting and holding onto staff.
Many states and providers put the grants toward higher compensation to try to solve the staffing issue, but when the money dries up, providers will once again be strapped to pay their teachers competitively. That will mean the return of wait lists and classroom closures. “We’ll see programs having to shutter their doors,” Hedgepeth said. Providers will have no choice but to keep increasing prices on already-stretched families.
States have already started warning providers that ARP money will run out by midyear or year-end. They may find themselves walking back the policy changes the grants allowed them to implement, a core problem with a useful but ultimately temporary program. “It’s not long-term, it doesn’t get to the root of the problems,” Schmit said.
The extra bump in compensation that Clark was able to give her staff will run out after 14 months. She’s already down five staff members thanks to the tight labor market, which means she has a “huge” wait list. But she was afraid to give her staff bigger raises, despite desperately wanting to pay them more, because “it was a one-time gift,” she said. “I don’t want to be in the position where in a year or two I have to say, ‘Excuse me, you know that raise I gave you, I can’t afford to give that to you anymore.’”
Clark has had to raise tuition for the fall to cover her costs, but even so, “it doesn’t cover the expenses of running a quality program.” Without more ongoing government funding, she won’t be able to keep paying her teachers as she is now without cutting back in some way. She’s permitted to have just one teacher with some age groups, but she’s loath to stick one person with nine or ten children. “If you’re diapering a three-year-old, you have nine three-year-olds who are not being paid attention to,” she said. “I really don’t want to have to do that, but I’ll have to, to stay in business.”
NOW THAT STATES HAVE worked through the kinks of getting ARP grant money out to providers, the systems and infrastructure they set up can be used and built upon if and when the federal government makes a long-term investment in child care and early-childhood education. “We do think in many ways the Rescue Plan program will lead the way and lay the groundwork for a longer-term program,” said Carmel Martin, deputy assistant for economic mobility to President Biden. The White House encouraged states to use some of the ARP money to create and upgrade these very systems.
ARP “has built the bridge,” said Malik. All states should now have a way to contact every single child care provider, an important first step toward getting more federal money out the door. They also built systems to make direct payments that could be called upon again, even if some would need to make tweaks and improvements. “We really just have seen that states are able to handle big influxes of resources,” Schmit said.
“Every state will have now managed a robust grant program in their child care systems where they reached thousands of programs and providers,” Hedgepeth said. The kind of investment that would have been made through Build Back Better “really lends itself to leveraging the systems that have been built under the American Rescue Plan Act funding.”
The White House isn’t giving up on significant federal investment in child care and preschool. “We are definitely committed to seeing the president’s proposal enacted,” Martin said. “We think it should have a very strong chance of ending up in any package that moves forward.”
But Congress would need to act, and act soon. “The cliff is coming,” Hogan said.
