The problem child care subsidies can’t solve: the shrinking provider pool

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A federal program critical to helping low-income families pay for child care got a historic boost late last year. 

Congress approved a $1.9 billion increase for the Child Care Development Block Grant, bringing its funding to $8 billion for 2023. The block grant, commonly called CCDBG, is distributed to states, which then help low-income families pay for child care.

CCDBG has been integral to providing more families with access to child care, said Sarah Rittling, executive director of the nonprofit First Five Years Fund. The additional funds will help expand the reach of the program; nationally, only about 1 in 6 children who are eligible for a CCDBG subsidy actually receive one.

“It’s a significant funding stream that goes to states, and states use that in different ways. But at the end of the day, there’s not enough care and the care that is available is really expensive for families,” Rittling said. 

The additional funding could expand child care to about 130,000 more children across the country by making care affordable for those families. “In many states, parents are paying more for child care than for their mortgages or even for in-state college tuition,” said Dan Wuori, senior director of early learning with The Hunt Institute, a nonprofit organization that focuses on education research and policy.

But if states simply use the funds to provide more families with vouchers or subsidies, there might not be enough providers to serve them. 

Because of competing crises within the industry, expanding child care access cannot be accomplished simply by increasing the number of child care vouchers available to families. Child care providers are struggling with low pay and a shortage of workers: Jobs in the industry remain below pre-pandemic levels even as the overall job market bounced back rapidly

States might be better served by not only increasing the number of child care subsidies for families, but also addressing a lack of available child care slots, Wuori said.

There is some flexibility in how states use the CCDGB funds, but there isn’t enough flexibility or funding to substantially increase wages for workers, said Alycia Hardy, a senior policy analyst for the Center for Law and Social Policy. This is because most of the CCDBG funds must be used for direct services, like providing subsidies for families.

States can, however, use the money to increase the amount of each subsidy. This will not only make care more affordable for the families who receive the vouchers, it will also make it more likely that child care centers will accept them. 

“Often, those rates that states pay are much lower than what providers actually charge for families, and this can be a discouraging factor for those providers accepting CCDBG,” Hardy said. “Raising the reimbursement rates is a really great way to increase access for those families to make sure that providers are being compensated in a way that at least meets their current rates that they’re charging.”

Even though this is the second-largest increase in the history of the CCDBG program, it is nowhere near the level of funding states received to keep the child care industry afloat during the pandemic. The last of those funds, which came from the American Rescue Plan and totaled about $39 billion, are set to expire in 2024.

“It definitely shows that Congress is starting to prioritize and recognize the importance of child care, but it’s certainly not enough to make up for that $39 billion,” Hardy said of the budget increase. “It’s not enough to also make up for the decades of underinvestment in child care, [and] the lack of a federal or state level child care system that is publicly funded.”

This story about child care subsidies was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.

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