LOS ANGELES — Sirens are sounding for American families that on Saturday the nation will fall off a “child-care cliff.”
That’s when $37 billion in child-care pandemic relief from the federal government will expire. Across the nation, providers have used that money to pay their teachers more, buy cleaning supplies and food amid rising inflation, and keep their doors open despite low enrollment during the COVID-19 pandemic emergency. An additional $15 billion in federal child-care relief is set to expire in September 2024.
The emergency money was meant as a Band-Aid to sustain an industry hobbled by the pandemic shutdowns. But the loss of funds could have significant consequences for an industry already on the brink of crisis.
How is the loss of federal funds predicted to affect the child-care industry nationally?
An oft-cited report from the Century Foundation, a progressive think tank, found that more than 70,000 child-care programs — one-third of those supported by the American Rescue Plan stabilization funding — could close when funds expire, leaving 3.2 million children without child care.
In California, which received $5 billion in federal funds, the report projected more than 13,000 programs would probably close, and 84,000 children would lose access to their care, a number that some in the state dispute.
The estimates were based on an October 2022 survey by the National Assn. for the Education of Young Children of 12,000 providers nationwide; one-third of directors and owners receiving pandemic relief funds reported they would have closed permanently without the grants.
One in four said they would raise tuition for working families when the federal funds expire. More than a quarter said they would cut staff wages, down from an average hourly rate of $14.22 nationally.
But the actual effects of the losses will probably vary greatly by state.
How did it get this bad?
The child-care system was in bad shape even before the pandemic, with many working parents unable to find or afford care. Over half of parents spend more than 20% of their income on child care, yet many providers can barely afford to keep their doors open. The problem, at its core, is that child care simply costs more to provide than parents can afford to pay.
In 2021, Treasury Secretary Janet L. Yellen described the industry as “a textbook example of a broken market.” One possible solution, advocates say, is to have the federal government chip in for more of the cost. The pandemic relief funds were a stopgap measure to do just that. But many advocates hoped robust federal funding would become permanent through the Build Back Better Act. The proposal, however, failed in the Senate.
Legislation proposed in Congress this month would extend federal child-care payments with an additional $16 billion in funding for each of the next five years. But with new funding unlikely to pass a divided Congress and the federal government grappling with a possible shutdown, advocates say the child-care market could enter a tailspin.
“Early educators make poverty wages,” said Annie Dade, a policy analyst at the U.C. Berkeley Center for the Study of Child Care Employment. “The injustice existed pre-pandemic and will only be made more obvious now.”
In states like Minnesota that required providers to use the pandemic funds to increase wages, Dade said, the loss of funds could quickly lead to a pay cut for workers. In states that have already moved to offset the loss of federal funds, such as New Mexico and Massachusetts, the impact is expected to be minimal.
What does this mean for parents who do not qualify for subsidies?
Most of the federal pandemic child-care funding primarily affect programs that accept subsidies from the state to care for children from low-income families.
Day-care programs that care for families who pay privately were not eligible for most of the federal stipends, and their rates are not affected by the recent state increases that were part of the union negotiation.
The private market continues to suffer from teacher shortages, rising tuition, a scarcity of slots for infants and toddlers, and losses to the state’s transitional kindergarten program. But middle-class families that pay out of pocket for care are unlikely to feel much of a change from the expiration of federal funds, nor will they be helped significantly by the state’s recent moves to bolster the child-care industry.