Child care crisis prompts states to consider new investments

Proposals include increasing subsidies for low-income families and new tax breaks
The Minnesota State Capitol in St. Paul. (AP Photo/Steve Karnowski, File)

State leaders are redoubling their efforts to prop up struggling daycares and help families pay for child care.

Governors and lawmakers in both red and blue states this year have proposed increasing child care subsidies for low-income families, raising reimbursement rates for providers that serve subsidized children, expanding publicly funded kindergarten and preschool, and creating new child care-related tax breaks.

Minnesota leaders are among those poised to make major new investments this year. The state House on Monday approved two fast-tracked child care bills, thrilling advocates.

“We are gobsmacked, honestly,” said Clare Sanford, government relations chair for the Minnesota Child Care Association, which represents child care providers. “We have never seen movement like this.”

Families nationwide have struggled for years to find affordable child care, and state and federal policymakers have supported child care businesses with relief aid throughout the pandemic. But the issue is getting more attention this year due to the tight labor market, expiration of federal Covid-19 child care aid and, in some cases, political shifts.

The Minnesota Senate this year flipped from Republican to Democratic control, lending momentum to early childhood ideas Gov. Tim Walz (D) and Democratic House leaders have long supported.

“Before now, we had a Republican-controlled Senate which just was not particularly interested,” said Rep. Dave Pinto (D), chair of the Children and Families Finance and Policy Committee and sponsor of both fast-tracked bills. “And we now have partners in the Senate, controlled by Democrats, who are.”

Governors and lawmakers in most states also have extra cash to spend this year. Minnesota has an estimated $17.6 billion surplus, Walz said in January when he announced the education and child care portion of his biennial budget plan.

Despite bipartisan concern about child care shortages, lawmakers will likely spar over how much to spend to support providers and families and how to ensure state dollars aren’t wasted. Some child care providers also oppose efforts to expand publicly funded preschool.

“We want to be careful and cautious about how much government is competing with private business,” said Jared Rodriguez, executive director of the Child Care Providers Association of Michigan, a group that advocates for licensed daycares.

Child care providers say they need help addressing a serious staffing challenge. Home-based daycares and child care centers nationwide can’t find enough workers to fully staff their classrooms.

Providers can’t compete with employers in other industries, such as retail, that have raised wages in recent years or that now allow employees to work from home, Sanford said.

Many families now face years-long waiting lists to get into daycare and some parents have quit their jobs because they can’t find child care. Chambers of Commerce and other business groups say child care shortages may be making it harder for employers across the economy to fill jobs.

Meanwhile, federal Covid-19 relief funds that have kept child care businesses afloat since 2020 are running low. Congress has sent states billions of dollars to support providers and increase child care subsidies for families, including money providers have used to improve worker pay and benefits.

Almost all remaining federal dollars must be spent by Sept. 30, said Diane Girouard, state policy analyst at Child Care Aware, a national network of child care resource and referral agencies. She said that is leading some state leaders to ask how they can step in with state dollars.

That could happen in Minnesota, where Walz proposed permanently funding grants for child care worker compensation. Child care providers would get about $400 per full-time employee per month under his plan, Sanford said.

Walz’s budget plan also would increase reimbursement rates for child care providers, expand child care tax credits and subsidies for families, and expand public prekindergarten, among other efforts.

Governors and lawmakers in other states also are considering child care investments. Democratic lawmakers in Vermont want to raise reimbursement rates for providers, increase subsidies for low-income families and create a universal preschool program.

Delaware Gov. John Carney (D) wants to increase child care reimbursement rates and expand subsidies. Maine Gov. Janet Mills (D) wants to expand pre-K and fund salary supplements for child care workers.

Ohio Gov. Mike Dewine (R) wants to extend child care subsidies to reach 15,000 more children. And Missouri Gov. Mike Parson (R) wants to raise reimbursement rates and expand preschool to serve all low-income children.

Parson also wants to create three new tax credits: one for child care providers, one for employers that help employees pay for child care, and one for people or organizations that fund improvements to a child care center.

If fully implemented, Parson’s plan would increase Missouri’s early childhood spending by almost $200 million, said Casey Hanson, director of outreach and engagement at Kids Win Missouri, an advocacy group.

“It’s truly just historic, and a once-in-the-generation investment being proposed,” she said.

The first bill approved by the Minnesota House on Monday would spend $52 million to expand child care subsidies and supplement federal aid to providers this fiscal year.

The second would permanently raise provider reimbursement rates to 75% of market rates — the federally recommended level — up from 40% of market rates for infants and toddlers and 30% of market rates for preschool and school-age children.

Companion bills are being considered by the Senate.

Some Republicans argued against both bills on the House floor Monday night. They called for more accountability and pointed to past allegations of fraud in the state’s child care subsidy program.

“We’re just going to throw some more money, we’re going to increase these rates, we’re not going to bother to know that these dollars are being spent the way they’re supposed to be spent,” Rep. Anne Neu Bridley (R) said.

Pinto told Pluribus News in an interview that the reimbursement rate bill had moved quickly because the governor and legislative leaders all support raising rates as soon as possible.

“It’s a federal standard that we should have met a long time ago,” he said. “Other states have met it. And the idea is just, let’s not wait, let’s get it done.”

Minnesota lawmakers also have introduced legislation that would expand eligibility for child care subsidies. The bill would allow kids under age 3 and families with incomes up to 200% of the federal poverty level to qualify. Currently only children ages 3-5 and families with incomes of up to 185% of the poverty level qualify.

Pinto said lawmakers are under pressure from their constituents to do something about the child care crisis.

“Our state is recognizing that this is a public good that deserves public support,” he said. “And that’s the purpose of a number of these bills.”