If you’re a parent with a child in daycare, you could be seeing some disruptions to your child-care situation soon — including cost increases.
On Sept. 30, $24 billion in government funding that was issued to child-care providers during the pandemic expired. The money, which was distributed to more than 220,000 child-care programs, was part of 2021’s American Rescue Plan stimulus package. More than eight in 10 licensed child-care centers received the funds through the Child Care Stabilization Program. The money covered costs including rent, utilities, employees’ salaries and supplies, according to the Administration for Children and Families.
The halted funding created a “child-care cliff,” according to advocates, and on the other side, parents could face longer waitlists, higher fees and even the risk of their child-care center closing as programs have dwindling funding to cope with higher costs.
“I really don’t think you can designate who will be able to survive this because it cuts across the board,” said Jennifer Wells, economic justice director at Community Change, a group advocating for low-income families and workers. Whether it’s a home provider, a daycare center or corporate care, all will face “some very tough decisions with the loss of money,” she added.
More than 70,000 child-care programs could potentially close in the long run because of the lost funding, according to the Century Foundation, a left-leaning think tank based in New York. The potential closures will happen over time, said Julie Kashen, an early education policy expert from the organization. But there is still a chance that centers could get needed financial support, she added, such as through the Child Care Stabilization Act, which is a piece of legislation that Democrats introduced in Congress. Individual states could also provide state funding to local child-care centers.
Child-care providers will face a series of three choices, all of which are difficult, Kashen told MarketWatch. First, they’ll have to decide whether to raise the rates that parents pay. Then, they might have to cut staff, which could result in closing certain portions of daycare centers, such as sections of the center that serve children under a certain age. Eventually, closing the facility entirely could be the last resort.
The funding cliff comes as child care in the U.S. has grown harder to find and increasingly expensive — you can check MarketWatch’s calculator to see the costs in your area. Here are three questions that can help you, as a parent, figure out how likely or how soon your child-care setup will be impacted by the “child-care cliff.”
1. Which state are you in?
Nothing can totally replace the lost federal funding, advocates and providers said, but many states have passed legislation in the past year to provide more money for child care. The more generous the state funding is, the easier it is for providers and parents to navigate life after the federal funding halt.
At least 12 states — including Alaska, California, Kentucky, Illinois, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, North Carolina, Vermont and Washington — invested in measures to directly address the end of the federal funding, according to a recent analysis from Child Care Aware America. For example, last year, New Mexico residents voted to put $150 million into child care and early learning every year, making it one of the first states to provide permanent funds for child care.
Some others — Alabama, Louisiana, Montana and North Dakota — increased funding for their subsidy programs. And a few states, such as Missouri, Ohio and Rhode Island, found ways to redistribute the expiring federal funds so that they can still use some of the money.
2. How old is your child?
The younger the child, the more expensive care is for parents, and the more expensive it is for centers to provide. This is especially true when it comes to infants.
Infant care was the hardest for parents to find even before the pandemic because of the high staff-to-infant ratio it requires, Kashen said. The rise in labor costs made this labor-intensive job even more costly for providers. If child-care providers have to choose one room in their center to close, infant care might be the most vulnerable in the wake of the lost federal funding.
Because of the need to have at least one staff member for every three infants, providing infant care makes very little money for providers, said Jennifer Trippet, the owner of Cubby’s Child Care Center in West Virginia.
“There’s no money made in infant care even though it’s highly in demand,” Trippet told MarketWatch.
Hiring has been difficult for the past six months, and because of the rising costs of food and supplies, Trippet had to close down her infant care center in August.
As a result, she wasn’t able to take in any infants off her waitlist. Normally, Trippet would be able to take around 40 children off the waitlist in the fall. The waitlist for all ages at her center totals more than 350 kids.
Trippet had hoped the closing of her infant center would be temporary, but with the federal funding halt, if she can’t find more funding either from the state or at the federal level, Trippet will not be able to provide infant care going forward. Trippet has been active in pushing her state to provide more funding for child-care providers.
3. How big is your child-care provider?
Providers of all sizes will likely be impacted, experts said, but some more than others.
Larger centers like Trippet’s Cubby’s can close down one room to cope with funding disruptions. Smaller centers with fewer workers, especially home-based providers, have fewer options and are taking on a “bigger burden,” said Wells from Community Change.
Among them is Darlisa Navarro, who owns and operates a home-based daycare, Omega’s Dream, in the Dallas, Texas area. Most of the parents who send their children to her work in warehouses, call centers and fast food stores, she said. About 90% of Navarro’s families use a subsidy program, with which parents pay her a flat co-pay. Unless the subsidy program raises rates to pay providers more after the federal funding expires, Navarro has little room to ask parents to pay more.
“I’m working with very low-income individuals who have different things going on with them,” Navarro said. “They wouldn’t be able to pay me out of pocket at all with the money that they make without the subsidy program,” Navarro said.
Navarro typically has about 20 kids on her waitlist, but it’s rare she can take anyone in. She has been wanting to expand, and she’s been searching nearby for a new building, but with the federal funding ending, the possibility of an expansion looks slimmer.
“The federal funding kept us afloat, period,” Navarro said. “It was able to help me get my assistant in here. And it’s helped me pay her for the past two years.”
Without the funding, Navarro could lose the only assistant she has, she told MarketWatch. And it could come to a point where she has to close down and find a different job entirely.
“We just really need that money to channel down for us providers, not for the providers, it’s really for the kids,” Navarro said. “The kids need a safe space to be Monday through Friday.”
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