States invest in child care as emergency federal aid ends

There was ‘historic’ spending in states controlled by both Democrats and Republicans.
Kiera Holthusen reads a book at Bumble Art Studio day care center in Astoria, Ore., Friday, Sept. 2, 2022. (AP Photo/Craig Mitchelldyer)

Governors and lawmakers in 18 states made major investments in preschool and child care this year, money that will help some providers and families as federal Covid-19 aid winds down.

Families have struggled for years to find affordable child care as child care businesses struggled to make a profit. But the issue is getting more attention now amid a nationwide worker shortage and pressure from business leaders, who argue that better access to child care could help parents stay in the workforce.

The bump in spending was aided by three years of revenue surpluses that left states with extra money lawmakers could use to invest in child care or other priorities.

“We saw historic state investments in blue, red, purple states,” said Diane Girouard, state policy analyst at Child Care Aware, a national network of child care resource and referral agencies.

Minnesota lawmakers approved $362 million in support for child care businesses and bonuses for early childhood educators. North Dakota lawmakers spent nearly $66 million to expand child care programs and bolster child care subsidies for families. Kentucky Gov. Andy Beshear (D) announced in August $50 million in additional funding for child care providers.

The additional spending by some states comes as major federal investments during the Covid-19 pandemic emergency come to an end.

Congress approved over $52 billion in aid to the child care industry across three spending bills. Over 70% of the money was appropriated under the 2021 American Rescue Plan Act. Most of that cash, which helped child care providers cover their costs and pay workers, had to be spent by Sept. 30.

Advocates for child care providers say many centers will not be able to survive without the federal aid program, which has granted tens of thousands of dollars to about 8 in 10 child care centers nationwide.

As the funding winds down, “we’ve heard multiple stories of programs telling us they’ve had to close,” said Daniel Hains, managing director for policy and professional development at the National Association for the Education of Young Children, a membership group. Others that want to serve more families are “operating below capacity” because “they can’t hire enough staff to do so, so they’re shutting classes.”

No state has pumped enough money into child care to fully replace the waning federal aid, Hains said.

“We’d love to see that continue,” Hains said of state investments. But, he said, “it also cannot make up for the loss of federal funding, not entirely.”

More than 70,000 child care programs nationwide could close and more than 3 million children could lose access to care when the federal assistance runs out, according to a study by the Century Foundation, a left-leaning think tank with offices in New York City and Washington, D.C.

Some states have already spent all the federal child care aid they received, Girouard and Hains said, but others have not. About 30% of the American Rescue Plan Act child care funds must be spent by Sept. 30, 2024.

The federal government has more capacity to make large investments, he said. Democratic members of the U.S. House and Senate introduced legislation this month to extend some of the expiring American Rescue Plan Act funding for child care.

The future of federal aid is uncertain, and not every state may move to invest in quality child care. If only some states take action, Hains said, “we’re going to see more disparities rise between what’s available in different states.”