Legislation to address child care shortages statewide moves forward as funding questions remains

OLYMPIA – A broad legislative proposal that would address child care shortages and prices across the state passed its first major hurdle last week. The bill would expand child care access for families and improve support and subsidy rates for providers through a newly created funding account.

The House and Senate are hearing companion bills addressing the same issues. Both passed in their house of origin and will now be heard in the opposite chamber before final passage.

“This is a road map for child care and early learning,” House sponsor Rep. Tana Senn, D-Mercer Island, said. “It’s a vision of where we can go.”

Lawmakers agree child care is a priority this session, as the COVID-19 pandemic has highlighted the need for accessible, affordable health care. But how exactly to fund it remains controversial. Here’s a look at what’s in the current versions of the bills:

New funding accountThe first thing the bill would do is create a new state account dedicated to child care and early learning funds with a nonexhaustive list of allowable uses. The Senate and House versions differ slightly, but the list includes:

• Increasing subsidy rates
• Increasing provider compensation
• Providing supports for family, friend and neighbor caregivers
• Expanding health care coverage for providers
• Increasing provider compensation
• Providing regulatory and licensing relief for providers
• Developing a language access plan for equity and immigrant and multilingual access
• Delivering mental health services for providers

“This is landmark legislation,” Senate bill sponsor Sen. Claire Wilson, D-Auburn, said.

The current funding mechanism for child care making its way through the Legislature is the controversial capital gains tax, backed by Democrats.

The proposal, which narrowly passed the Senate earlier this month, would impose a 7% tax on capital gains greater than $250,000 with exceptions for the sale of homes, commercial real estate, small business and livestock.

The state won’t begin receiving revenue from the tax until 2023 at the earliest. When it does go into effect, it will raise about $550 million every two years. The first $350 million would be prioritized for child care funding to help keep these programs afloat long-term.

In the short term, however, lawmakers are looking at money from the newly passed federal stimulus package. Washington is expected to get $635 million from the federal government for child care costs. While that is one-time money, it could help fill the gap before a capital gains tax or other funding mechanism could go into effect, Wilson said.

What bill does for familiesThe bill looks to combat the child care crisis from two sides: that of families and providers.

For families, the bill would expand access to the state’s subsidy program, Working Connections Child Care. Currently, the program provides subsidies for families with incomes at or below 200% of the federal poverty level, currently $21,960 annually for a family of three. If enacted, this legislation would increase the eligibility to families with income between 75%-100% of the state’s median income, currently $86,340 for a family of three.

It would also allow full-time students to enroll in Working Connections Child Care, regardless of work status.

“By increasing eligibility, we’re allowing more and more families to get help,” Senn said.

The bill would change the monthly copayment system, using the state median income instead of the federal poverty level. For families with a household income at or below 36% of the state’s median income, their copayment would be waived. For families between 36%-50%, the copay would be $65. For families between 50%-60%, the copayment is $165, and those between 60%-75%, the copayment is $215.

Eligibility for children using the state’s preschool program, the Early Childhood Education and Assistance Program, would also expand to include those with an income between 36%-50% of the state median income.

The issue of child care is especially important in Spokane, which has a low median household income and high rate of poverty, Democratic Sen. Andy Billig said.

“High quality early learning and child care is the No. 1 way to help break the cycle of poverty,” he said.

What bill does for providers

Both providers and families need financial support in order to make the current equation work, said Ryan Pricco, the director of policy and advocacy at Child Care Aware Washington.

One of the biggest ways to support providers is increasing the child care subsidy rate.

For providers who accept children using subsidies, the state pays for only a portion of the actual cost. Currently, the state determines the average cost of child care for a certain age in a certain area of the state and subsidizes 65% of those costs. This bill would increase that to 75% by July 1 of this year and 85% by July 1, 2023.

The subsidy rate is often lower than what a provider charges parents who don’t use subsidies. Providers cannot charge parents the difference between the subsidy and their private rate, so providers often lose money by accepting children on subsidies.

“They still take the vouchers,” Pricco said. “Nobody’s in this industry to make money.”

Another issue for providers is lack of support, including lack of health care, benefits and mental health consultation.

The lack of benefits, retirement plan and health care leads to huge turnover, Pricco said, and that can make it difficult for child care businesses to expand their operations.

While this bill wouldn’t directly give providers health care insurance, it would require the Department of Children, Youth and Families to evaluate options for supporting affordable health care insurance coverage. The bill would also require the department to provide mental health consultation for providers and establish a dual language designation for providers.

Child care deserts exist throughout the state, especially in rural Washington. Increasing subsidy rates and support could allow providers to create more slots or open in other areas of the state, which would improve access to families, Billig said.

Republican concerns

While Republicans have said child care needs additional funding, many have concerns with the Fair Start for Kids Act, which they say overregulates the industry.

Rep. Tom Dent of Moses Lake, ranking Republican on the House Children, Youth and Families Committee, said overregulating child care could drive up the cost for providers and families.

“If we back up on regulatory requirements, they’d be able to operate more efficiently,” Dent said.

Wilson said this bill focuses on access to child care and less on regulation, though it does encourage the state to continue looking at regulations and licensing to ensure it is supportive of providers instead of focusing on compliance.

“We have quality, and now we’re looking at access,” she said.

Dent and other Republicans also have concerns with the proposed capital gains tax used to pay for the child care bill. Many of them have called it an unconstitutional income tax that remains a volatile funding source if enacted.

Funding child care can come through the general fund, Dent said. House and Senate Republicans have introduced their own budget proposals, both of which include funding for child care from the general fund or the Rainy Day Fund.

Supporters’ argumentsThe bills still have to pass through the opposite chamber before being reconciled into one bill and brought to the budget committees, but supporters are confident that this is the year to fund child care priorities.

The lack of child care has become more prevalent as many families were forced to work from home during the pandemic, Senn said.

“What used to be a taboo topic almost is now front and center and literally staring people in the face,” she said.

Billig said the pandemic has exposed “some of the cracks in our communities,” one of which is child care. It was in a crisis before the pandemic but is now in need of even more investment.

“If we don’t intervene right now, more and more programs will close,” Pricco said.

Economic recovery post-pandemic will depend on boosting child care resources, Wilson said, and people are finally understanding that.

Not only will improving the child care industry improve the state’s economy as a whole, Pricco said it will also significantly improve equity as women and women of color tend to be the main child care providers.

“People are finally realizing that we need child care,” Wilson said. “We all need child care.”