Looming End of Emergency Child Care Funding Threatens Price Hikes and Closures

The imminent expiration of emergency child care funding is set to disrupt the child care industry, potentially leading to higher prices and facility closures across the United States.

Child care has long been a source of financial strain and limited accessibility for many American families, with parents often shelling out over $10,000 annually on average. Furthermore, more than half of the U.S. population resides in areas designated as “child care deserts,” marked by inadequate child care services.

Industry advocates are now sounding alarms, warning of worsening circumstances in the coming months. The primary cause of concern is the expected steep reduction in federal child care funding, slated to commence on September 30. This funding has played a pivotal role in stabilizing the child care sector over the past two years during the pandemic. The impending expiration could result in the loss of a staggering 70,000 child care programs and over 3 million child care slots, as estimated by The Century Foundation, a progressive public policy think tank.

Julie Kashen, Senior Fellow and Director for Women’s Economic Justice at The Century Foundation, emphasized the crucial lifeline that this funding has provided to the child care sector. It has enabled providers to keep their operations running, enroll more children, and given parents peace of mind knowing their children are well-cared for.

The Child Care Stabilization Program, valued at $24 billion, was established through the American Rescue Plan of 2021. This program allocated funding to more than 220,000 child care programs, benefitting approximately 9.6 million children, according to the U.S. Department of Health and Human Services. Over 80% of licensed child care centers nationwide received assistance, using the funds to cover various expenses such as personnel costs, rent, utilities, and personal protective equipment.

The American Rescue Plan also included $15 billion to expand the Child Care and Development Block Grant, designed to assist low-income families in paying for child care. However, this funding is scheduled to expire at the close of September 2024.

For child care providers like Melissa Colagrosso, CEO and Senior Director of A Place To Grow Children’s Center in West Virginia, the additional funding brought much-needed relief. It enabled the child care center to offer staff bonuses and carry out essential infrastructure improvements, including lighting upgrades and HVAC system replacements. Colagrosso, who has managed the center since 1995, expressed concerns about the future viability of her business once the supplementary funding is exhausted.

The impending funding gap places child care programs in a precarious position. They may be forced to increase staff wages, potentially leading to even higher costs for parents, or reduce staff salaries, which would exacerbate the already substantial turnover in an industry that is still 40,000 workers short of its pre-pandemic staffing levels.

According to The Century Foundation’s projections, the child care workforce is expected to lose an additional 232,000 jobs post-funding expiration as employees seek more financially lucrative opportunities. Six regions, including Arkansas, Montana, Utah, Virginia, West Virginia, and Washington, D.C., are anticipated to lose over half of their licensed child care programs.

Cindy Lehnhoff, Director of the National Child Care Association, an industry trade group, noted that child care providers struggle to compete with other industries’ salaries, especially when these alternative employment options help workers pay off student loans and keep pace with rising living costs.

As of May 2022, child care workers earned an average of $14.22 per hour. In contrast, preschool teachers, many of whom work in public and private schools, earned $18.58 per hour. Food and beverage serving workers earned $14.69, retail sales workers received $15.62, and animal caretakers made $15.46, according to data from the Bureau of Labor Statistics.

Demeatrice Nance, a Cleveland-based parent, and her husband are grappling with the staggering cost of child care for their 9-month-old granddaughter, amounting to $280 per week, nearly $15,000 annually. While the expense has strained their budget, they had limited alternatives. Nance’s daughter, a single mother earning $18 per hour, was denied child care assistance because her income was deemed too high for the state’s child care voucher program. As a result, Nance and her husband stepped in to assist, despite it not aligning with their budget.

Nance estimates that child care consumes roughly 30% of her combined income with her husband. She fears that once the emergency funding concludes, the costs will place an even greater strain on their finances. The family has begun exploring potential cost-cutting measures and discussed the possibility of their daughter moving back in with them.

The repercussions of losing child care programs are expected to reverberate throughout the U.S. economy as more parents reduce their working hours or leave the workforce entirely to care for their children. This loss in tax revenue and business income is projected to cost states approximately $10.6 billion annually, according to The Century Foundation.

Susan Gale Perry, CEO of the advocacy organization Child Care Aware, emphasized the urgent need to address the broken child care system, highlighting the unaffordability for parents and the financial challenges faced by teachers in the industry. Perry urged the nation to confront the question of fair responsibility-sharing among families, the public, businesses, and communities.