TCF fellow Laura Valle Gutierrez testified at a Women’s Democratic Caucus “shadow hearing” on June 22, 2023, “The State of Child Care in America.” Her testimony, which you can read below, explains the dire consequences that the rapidly approaching child care funding cliff will have for women, children, families, early educators, and state economies as federal child care stabilization grant funding expires at the end of September.
It is an honor to speak with you all today about the rapidly approaching child care funding cliff, which will have dire consequences for women, children, families, early educators, and state economies. I’m Laura Valle Gutierrez, a fellow on the Women’s Economic Justice team at The Century Foundation. We are a progressive, independent think tank that conducts research, develops solutions, and drives policy change to make people’s lives better.
The problem of high tuition prices, low wages for early educator, and decreasing program supply in the child care sector has grown in severity for several decades, but was pushed to crisis levels by the COVID-19 pandemic. The pandemic laid bare the vulnerabilities and limitations of the United States’ failure to create and invest in a robust, resilient child care system. All told, the United States lost an estimated 20,000 child care programs in the first two years of the pandemic, nearly 10 percent of its pre-pandemic amount of child care programs. Though these numbers represent a devastating setback for thousands of impacted children, families, and early educators, the toll could have been far worse.
In March 2021, Congress took decisive action to pass the American Rescue Plan Act (ARPA)—which included substantial child care stabilization grant funding—to help child care providers stay afloat and meet families’ need for care in the midst of the COVID-19 pandemic. These funds made a tremendous difference for providers like Suzanne in Connecticut, whose child care center serves approximately seventy-five families. As she told the National Association for the Education of Young Children (NAEYC), “Those grant funds meant the difference between shutting down and keeping our doors open.”
NAEYC also heard from a family child care owner in Oregon who noted about her pandemic experience that, “the costs of running a child care program have increased tremendously. The costs of staffing are higher now that we pay better and provide benefits. Parents cannot pay for the actual cost of child care services. The stabilization grant subsidized some operation costs in my program to keep tuition affordable and to attract and retain staff.”
Mabis, who runs a family child care program in New York, was able to pay down the debts she racked up at the height of the pandemic, and, in her words, “better the care for children and fix the car so I can drop off and pick up kids from school and home.”
ARPA Saved Thousands of Child Care Programs
According to the Administration for Children and Families, child care stabilization grants went to 220,000 providers, in every state in the nation. Funds reached over 80 percent of licensed providers across the country and impacted nearly 10 million children.
Providers used these funds to cover their operating costs during a time of higher expenses and decreased revenue. This use included offering bonus pay in order to recruit and retain personnel at a time when COVID-19 precautions required reduced enrollments. Providers also used grants to cover rent or mortgage payments, and utilities, as well as to buy personal protective equipment (PPE) and air filters to mitigate the risk of spreading COVID-19.
The COVID-19 pandemic placed extra pressure on providers, in a sector that already operated on thin margins, and so ARPA stabilization grant funding was an essential lifeline. Now, in just over 100 days, stabilization grant funding will expire. Millions of families across the country, in all fifty states, will lose child care or have to pay more. Many parents will cut back hours at work or be forced to leave their jobs.
3.2 Million Children Likely to Lose Spots with End of Federal Funds
Knowing how essential these stabilization grants were for the child care sector and the families that rely on it, The Century Foundation partnered with economist Jessica Milli from Research 2 Impact to project the impact that the child care funding cliff will have on the United States. Using data from the Administration of Children and Families on the reach of stabilization grants, as well as provider survey data on the impact of those funds from NAEYC (reflecting feedback from 12,000 providers), we found that when the funds expire at the end of September, 3.2 million children could lose their child care slots, as programs close, staffing shortages grow, and tuition costs rise.
In five states—Arkansas, Montana, Utah, Virginia, and West Virginia—as well as in Washington, D.C., the number of licensed programs could be cut by half or more. In another fourteen states, the supply of licensed programs could be reduced by one-third.
To estimate how losing child care would affect parents and states, we used data from the U.S. Census Bureau and National Center for Education Statistics to identify which parents could be impacted and how their work would be affected if they lost child care. Altogether, we found that the loss of child care options for families is estimated to cost parents $9 billion in lost wages, and to cost states $10.6 billion in lost economic activity, including lost tax revenue and lost business productivity.
Moreover, according to the Bureau of Labor Statistics most recent employment report, the child care workforce is still 50,000 jobs below pre-pandemic levels—a level that was already insufficient to meet the demand of child care. Using NAEYC survey data, we project that the sector may lose an additional 232,000 jobs, as providers will no longer be able to offer pay bonuses and given the high levels of burnout in the sector.
These impacts will be felt in every state: 300,000 child care slots may be lost in Texas; Virginia could lose 1,300 child care programs; 23,000 child care workers in California may lose their jobs—all if Congress doesn’t take action now.
Mitigating the Catastrophe of the Child Care Funding Cliff
Thanks to the ARPA funding, states not only stabilized their sectors but also were able to innovate ways to lower prices for families and make more and better child care options available to parents. For example, New Mexico used a combination of ARPA funds and state resources to permanently increase compensation for child care workers by $3 an hour. To address staffing shortages and compensate early educators fairly for their complex and valuable work, Michigan’s ARPA stabilization grant includes stipends for child care professionals in the amount of $500 to $1,000 one-time stipends paid to staff. Washington, Oregon, and Washington, D.C. used funds to provide health insurance to early educators.
A child care center director in Louisiana expressed to NAEYC the concerns shared by many about these funds going away: “We would like to keep our staff working for higher pay. After the end of the stabilization grants, the increase will need to be passed on to our families. We really don’t want to do this, but will have no choice, in order to continue to serve all of our families. Higher pay for our staff is a must in order to keep the numbers where they are in our center.”
Nicole, a director in New Jersey said: “I wonder how any of us will be able to keep our own heads above water long term. It’s so sad and worrisome. It’s not the only solution, but stabilization grants are one thing that has been greatly appreciated and helping. I pray they will continue.”
As the largest investment in child care in American history expires in September, children and families cannot wait and providers cannot rely on prayers. Congress must act now. We need immediate funding to stave off the crisis as well as permanent, long-term investments. The Child Care for Working Families Act, for example, would make child care and early education affordable so that any parent—no matter where they live or what they look like—would have great care options for their children.
The stakes are high: 70,000 child care programs; 200,000 early education jobs; 3 million children and their parents; and nearly $11 billion in state economic revenue. When America decides something is a priority, we find the funding. It’s time to prioritize child care to ensure all our families are able to thrive.