By Shira Small and Alyssa Fortner

To keep child care providers’ doors open and help keep families afloat during the COVID-19 pandemic, the federal government approved unprecedented one-time investments in the child care sector, totaling more than $50 billion across three funding streams. The largest funding stream came from the American Rescue Plan Act (ARPA), which added $39 billion to the child care sector.

These resources were used to improve access, support providers, make care more affordable, and enable long- overdue policy improvements across states. Their impact has been tremendous, but the last of these resources are set to expire on September 30, 2024. While some states have passed stopgap funding to maintain the progress achieved through the stabilization grants, more work and financial resources are necessary to preserve the impact of these investments.

Positive Progress

A White House Council of Economic Advisors (CEA) analysis found that emergency ARPA funding helped lower the average cost of care for families by 10 percent, amounting to $1,250 cost savings per child annually. Providers saw an average wage increase of $3,800 annually, with COVID-19 relief funding reaching about 950,000 providers. In addition, the increased access and affordability of care helped 325,000 more women participate in the labor workforce.

Our CLASP report, Pandemic Child Care Relief Funds: Documenting Impact Across Four States, explored the innovative progress states made through conversations with parents, providers, advocates, and child care administrators who saw the impact of relief funding firsthand in four states:

Virginia extended income eligibility to 85 percent of the state median income (SMI) for families with at least one child age five or younger who is not yet in kindergarten and waived co-payments for all families for 19 months. The state increased the number of children served by subsidies from 14,000 in July 2021 to 40,000 in March 2023, based on interviews with the Virginia Department of Education.

Michigan used the federal child care relief funds to expand the availability of care and better support the workforce. One initiative was Caring for MI Future, which invested $100 million with the goal of opening 1,000 new child care programs by the end of 2024. At the time of our interview with the Department of Child Development and Care in early 2023, the state had 655 new providers. In November 2023, that figure grew to 1,000 new providers.

Louisiana convened a coalition of parents, providers, and advocates to develop the Geaux Far Louisiana Initiative, working with several Louisiana state agencies to engage over 1,000 parents in listening sessions to create a strategic plan for early childhood. They are now working to implement this plan across communities and the public and private sectors.

What’s at Stake Without Additional Resources

The loss of resources has already had significant negative impacts. Another CEA report found that while the cost of child care decreased following the rollout of relief funds, it began to rise again after the first expiration of relief funding in October 2023. The report notes that this is likely to restrict child care access for families with low-to-middle incomes. The analysis also found that 7 percent more households across the country could not access child care following the expiration of ARPA relief funds, rising from 24 percent in 2023 to 31 percent in 2024. This means nearly one in every three families with children under the age of five reported being unable to find child care due to issues with cost, distance, safety, or supply.

Our report documents that children, families, and early educators are bearing the brunt of an underfunded child care sector, and those with low incomes will be disproportionately harmed as access to care recedes. Our research showed:

The Virginia Early Childhood Foundation published data that estimates that the number of children served through CCDBG will drop from 44,315 to 11,011 between fiscal year (FY) 2024 and FY 2025 (See section above). Without sustained funding, Virginia’s positive progress will be reversed, and the ramifications will be felt by the families of over 33,000 children.

In Louisiana, the first round of expiration already took a toll on families’ access to child care. The state had to open a wait list for its subsidy program on October 1, 2022, following the increased payment rates for families and change in eligibility guidelines that took effect as relief funding ran out.

In March 2023, the Empire State Campaign for Child Care in New York surveyed more than 1,660 programs making up approximately 9 percent of child care providers in the state. The campaign found that 3,857 staff positions were unfilled among responding programs, 28,462 children could not receive care due to the workforce shortage, and 25,022 children were on waitlists to get into these programs. Without increased investments in the child care sector, these numbers are likely to worsen.

With the final expiration of relief funding coming, federal policymakers must act now to ensure states continue to have the resources necessary to maintain the improvements made to the sector to better serve those who rely on it. To ensure that we continue moving forward, Congress must support the sector by answering the call sent from the Biden-Harris Administration for $16 billion in emergency child care funding, in addition to increased funding through the annual appropriations process for FY 2025.

Ultimately, the child care sector needs broad, transformational change and significant resources to back it. The workforce must be adequately compensated and supported; parents must have access to a range of affordable care options that meet their cultural and educational needs; and the system must be properly funded to finally recognize the importance of care in this country.