Unlocking the Future: Childcare Funding and Subsidies in the Wake of COVID-19

As the world grappled with the challenges posed by the COVID-19 pandemic, the childcare sector emerged as a critical cornerstone for supporting working families and ensuring the healthy development of young minds. Adequate childcare is a necessity for parents and a vital component of a thriving economy. This narrative delves into the realm of childcare funding and subsidies, exploring the measures taken during the pandemic and shedding light on the current state of federal subsidies.

The Impact of COVID-19 on Childcare Funding: A Balancing Act

The onset of the COVID-19 pandemic brought childcare concerns to the forefront, underscoring the importance of accessible, affordable, and high-quality childcare. Governments worldwide recognized the pivotal role of this sector in supporting economic recovery and fostering social well-being.

During the pandemic, various measures were implemented to bolster the childcare infrastructure. The U.S. government, for instance, injected significant funds into the sector to ensure that childcare providers remained operational and families had access to essential services. According to the U.S. Government Accountability Office, Congress provided more than $52.5 billion in supplemental funding to help keep childcare providers in business and ensure access to care for low-income families. According to the Department of Health and Human Services, as of April 2023, states spent an estimated $34.5 billion of the $52.5 billion in supplemental COVID-19 relief funds.

In addition, the $150 billion Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020, allocated funds to childcare providers, enabling them to cover expenses such as payroll, rent, and cleaning supplies, thus averting closures and layoffs.

The Child Care Assistance Program (CCAP) was also leveraged to support childcare expansion, and to cover the increase in operating costs post-COVID-19. In Illinois, for example, $270 million in relief funding went to childcare providers.

Subsidies and grants, from federal and state governments, were distributed to stabilize the sector, ensuring that parents could return to work without worrying about the availability and affordability of childcare.

Federal Subsidies and Their Current Status

The expiration of temporary pandemic-related funding and the strain on existing childcare subsidy programs have left a void that urgently needs addressing. While the initial response to the childcare crisis during the pandemic was swift and robust, the sustainability of federal subsidies has become a concern. 

For example, the American Rescue Plan was signed into law in March 2021 as emergency relief amidst a severe public health and economic crisis during the COVID-19 pandemic. This plan allocated $39 billion of emergency federal funding to support the nation’s child care, including $24 billion for the Child Care Stabilization Program.  This provided states, territories and tribes with grants to help subsidize the increasing operation costs for child care programs.   The federal funding for the Child Care Stabilization Program expired on September 30, 2023.

Looking Ahead: Childcare Advocacy and Policy Reforms

As the childcare sector stands at a critical juncture, it calls for sustained advocacy and policy reforms to secure its future. Stakeholders, including parents, childcare providers, and policymakers, must collaboratively work towards a comprehensive solution.

Advocacy efforts should focus on reinforcing federal childcare subsidies, recognizing them as a strategic investment in the nation's workforce and economic well-being. Moreover, there is a pressing need for long-term policy reforms that address the systemic challenges within the childcare sector, including workforce compensation, facility sustainability, and equitable access.

In conclusion, childcare funding and subsidies remain integral to a thriving society, supporting the workforce and the next generation. The lessons learned during the COVID-19 pandemic underscore childcare’s critical role in economic recovery and societal well-being. The path forward requires a concerted effort to secure sustained federal support, innovative state-level initiatives, and a commitment to long-term policy reforms. Only through such a comprehensive approach can we unlock the full potential of our childcare system and ensure a brighter future for families and communities alike.

What You Can Do?

Economic developers play a key role in advocating for childcare funding and policies that will create additional childcare spots and support providers. Discover what leaders are doing in their communities by reading Golden Shovel’s latest whitepaper. Find more details about the childcare whitepaper here.