Loss of Federal Child Care Funds Hits Working Parents Hard
The expiration of federal child care relief funding has left many families and providers facing significant challenges. The funds, provided through the American Rescue Plan Act (ARPA), were crucial during the COVID-19 pandemic, offering $24 billion to stabilize the child care sector. These grants helped over 200,000 providers stay operational, supported wage increases for early childhood educators, and eased financial burdens on families. However, the temporary funds expired on September 30, 2023, creating a “funding cliff” that has left many struggling to cope.
With the loss of federal support, many child care facilities are at risk of closing. Analysts warn that up to 70,000 centers could shut down, displacing 3.2 million children. This disruption is particularly challenging for working parents, especially mothers, who rely on affordable and dependable child care to maintain their jobs. The instability in the sector now threatens their employment and economic security. Even for families who retain access to child care, costs may rise as providers pass increased expenses on to consumers.
Child care providers, already operating on thin margins, are also struggling. Without continued financial assistance, many centers are unable to pay competitive wages, leading to challenges in retaining staff. The child care workforce remains over 10% smaller than it was at the start of the pandemic, further limiting the capacity and quality of care.
The broader economic implications of the funding loss are significant. Affordable child care is critical for maintaining a stable workforce, as parents, particularly mothers, rely on these services to participate in the labor market. Without adequate child care, parents may be forced to leave their jobs, reducing family income, disrupting retirement savings, and undermining economic productivity. The Century Foundation estimated an annual economic loss of $10.6 billion in decreased activity from the closure of child care centers, alongside $9 billion in reduced earnings for families.
In response to the funding gap, some states have implemented temporary measures to sustain child care services. For example, Wisconsin allocated $170 million in state funds as a stopgap measure to continue supporting providers through mid-2025. However, these efforts are not sustainable long-term solutions and may lead to funding tradeoffs elsewhere in state budgets. Policymakers have recommended using one-time funds strategically for temporary needs and preparing for the expiration of federal programs by identifying alternative funding streams or planning gradual wind-downs to mitigate a sudden shock.
To address the systemic issues in child care funding, the Biden-Harris Administration has called for a $16 billion investment to support child care providers and families. Additionally, the administration has proposed a transformative plan offering affordable, high-quality care from birth to kindergarten for families earning up to $200,000 annually. This initiative would cap child care costs at $10 per day for most families, with no costs for low-income households. Advocates emphasize the need for a sustained federal-state partnership to ensure that child care is accessible, affordable, and of high quality for all families.
Impact of Funding Loss on Families and Providers
The expiration of federal child care relief funding has created a ripple effect, severely impacting both families and child care providers. The closure of up to 70,000 child care centers not only displaces 3.2 million children but also disrupts the lives of working parents, particularly mothers, who are more likely to leave their jobs due to lack of affordable care. This disruption threatens to reverse the gains made in women’s labor force participation, highlighting the critical role of child care in gender equality in the workforce.
Economic Ripple Effects
Beyond the immediate impact on families, the loss of child care funding has broader economic implications. The closure of child care centers results in an estimated annual economic loss of $10.6 billion from reduced activity and $9 billion in lost earnings for families. This economic downturn affects various industries, as parents, especially mothers, are forced to leave their jobs, leading to a decrease in consumer spending and economic productivity. The child care sector acts as a cornerstone of economic stability, and its decline reverberates across all sectors, from healthcare to technology.
State-Level Responses and Challenges
While states like Wisconsin have allocated funds to sustain child care services temporarily, such measures are not sustainable. Wisconsin’s allocation of $170 million through mid-2025, for instance, provides immediate relief but may lead to funding trade-offs elsewhere in state budgets. Policymakers face the challenge of balancing short-term needs with long-term sustainability, emphasizing the need for strategic use of one-time funds and the identification of alternative funding streams to mitigate the sudden shock of federal program expirations.
Path Forward: Policy Solutions and Investments
The Biden-Harris Administration’s proposed $16 billion investment and transformative plan aim to address systemic issues in child care funding. This plan seeks to offer affordable, high-quality care from birth to kindergarten, capping costs at $10 per day for most families and eliminating costs for low-income households. While this initiative has the potential to alleviate current challenges, its implementation faces legislative hurdles and requires sustained federal-state partnerships. The feasibility of this plan depends on bipartisan support and public advocacy, underscoring the need for collaborative efforts to ensure accessible and affordable child care for all families.
Conclusion
The expiration of federal child care relief funding has created a critical challenge for families and providers across the U.S. The loss of these funds has led to a funding cliff, threatening the stability of the child care sector and the economic security of working parents. With up to 70,000 centers at risk of closure and 3.2 million children displaced, the impact on families, particularly mothers, is profound. The broader economic implications, including a $10.6 billion annual loss and $9 billion in reduced earnings for families, underscore the urgency for sustainable solutions.
While states like Wisconsin have stepped in with temporary funding, long-term fixes are essential. The Biden-Harris Administration’s proposed $16 billion investment and transformative child care plan offer hope, but bipartisan support and federal-state collaboration are critical for success. Addressing the child care crisis requires a sustained commitment to ensure affordable, high-quality care for all families, preventing further economic disruption and supporting workforce stability.
Frequently Asked Questions
What happened to the federal child care relief funding?
The federal child care relief funding provided through the American Rescue Plan Act (ARPA) expired on September 30, 2023. This expiration has created a “funding cliff,” leaving many child care providers and families without critical financial support.
How many child care centers are at risk of closing?
Analysts estimate that up to 70,000 child care centers could close due to the loss of federal funding, displacing approximately 3.2 million children.
What are the economic implications of the funding loss?
The closure of child care centers results in an estimated annual economic loss of $10.6 billion from reduced activity and $9 billion in lost earnings for families. This economic downturn affects various industries and reduces consumer spending and economic productivity.
How are states responding to the funding gap?
Some states, like Wisconsin, have allocated temporary funds to support child care services. Wisconsin allocated $170 million through mid-2025, but such measures are not sustainable long-term solutions and may lead to funding trade-offs elsewhere in state budgets.
What policy solutions have been proposed to address the child care crisis?
The Biden-Harris Administration has proposed a $16 billion investment to support child care providers and families. Additionally, a transformative plan aims to offer affordable, high-quality care from birth to kindergarten, capping costs at $10 per day for most families and eliminating costs for low-income households.