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Challenges Child Care Programs and States Face in Reopening and Beyond

The coronavirus pandemic has had immense impacts on the child care industry. At the height of the crisis, 60% of child care programs around the country had closed and one-third of the child care workforce had lost their job. Child care providers were pessimistic about their ability to stay in business long-term, and about half of parents were worried their child care provider would close permanently.

As states begin to reopen, many child care programs are as well. But for many, making it to the point of reopening was just the first step. Staying open in the coming months will be a significant challenge for many programs that operated on slim margins before the crisis, blew through savings during the pandemic, and face ongoing loss of revenue and increased costs for the foreseeable future—most likely until there is a vaccine. States are running out of their dedicated child care funding provided in the CARES Act, which was intended to be short-term stopgap assistance for the market to weather the crisis. Child care programs are still in the thick of the crisis and in dire need of assistance, revealing that Congress may have underestimated the amount of time this emergency would last for them.

The following is a summary of the challenges child care providers are facing as they struggle to reopen, how states are using the few child care dollars they have left to enable providers to reopen, and the ways state and local governments are desperately pulling from other funding streams to prop up a sector that the economy needs in order to restart.

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Providers Face Unique Challenges to Reopening

Increased Costs: Reopening and Retrofitting Facilities. For child care businesses to reopen and stay open during the remainder of this crisis, programs must take steps to reduce the risk of transmission which may require facility upgrades and modifications. These steps include creating self-contained classrooms and/or additional classroom space to accommodate social distancing and smaller group sizes, upgrading ventilation systems to improve air quality, retrofitting entryways to meet new screening protocols, enhancing hygienic features such as additional child-sized sinks and bathrooms, and other improvements to reduce the risk of exposure. These safety measures are necessary for the child care industry to rebound since 70% of child care teachers and 75% of parents feel uncomfortable returning to child care due to health and safety concerns. However, many programs around the country are having trouble paying for the supplies necessary to comply with these heightened safety standards.

  • In an April survey, nearly two thirds of California providers reported difficulty obtaining PPE and cleaning supplies, and requested financial assistance to do so.
  • In an April survey, 62% of South Carolina providers indicated that facilities costs like HVAC were a major financial concern, and 39% considered the costs of emergency sanitation supplies a major financial concern.

Lost Revenue: Reduced Class Sizes and Ratios. Restrictions on class sizes and reduced child-to-teacher ratios to limit the amount of social interactions mean less income for programs. Most states require providers to limit care to small groups of 10 children or fewer to reduce the risk of the virus’s spread. Just as with any business, when the capacity to serve customers is reduced, so too is the operating budget. Tuition from both “private pay” parents and public funding is the largest source of revenue for child care programs, and if programs cannot take in income, their ability to stay in business is in jeopardy.

  • A study of providers in Oregon found that lower capacity was a common barrier to reopening and staying open in the months ahead.
  • Programs in Alaska and New York echo the lowered capacity is not sustainable.

Lost Revenue: Reduced Enrollment and Attendance. Compounding class size and ratio reductions are concerns of low enrollment and attendance rates. Although many parents still need formal child care in order to work, some are either home with their children or concerned about the health implications of sending their children back to formal child care, leading to shifting demand. Additionally, attendance is likely to fluctuate as parents pull their children in and out of care to monitor their health, as school situations change, or as parents see changes in their own employment situations. Variable attendance means precarious revenue streams for the coming months, as child care programs rely on each child’s tuition to keep the lights on and pay staff.

Compounding Factors. The above factors, in combination with widespread closures during April and May, put the industry in a precarious state. Many providers do not have enough capital to cover their normal expenses, let alone the increased costs associated with reopening.

  • A May study of providers in Mississippi indicated that 51% could not pay even half their monthly expenses and that the industry lost an estimated $18.3 million in revenue.
  • An April survey of Louisiana’s child care programs found that 33% of providers expected extended closures would force them to close permanently and, to prevent this and allow them to reopen, programs estimated they would need an average of $23,000 of financial assistance.
  • An April study, of providers in South Carolina found the sector had experienced $40 million in lost revenue.
  • A study of providers in Kentucky indicated that 64% will need financial assistance to cover reopening costs.

States Are Using Remaining Child Care Dollars to Support Reopening

Some states are using the last of their supplemental Child Care Development Block Grant dollars provided through the CARES Act to offer financial support to encourage providers to reopen. Below are some financial assistance programs, beyond covering parent copays and subsidies, that states have introduced to restart their child care sectors. However, of the few states able to offer this assistance, many will no longer have the funds to do so by the end of June.

Idaho offers one-time, non-competitive Child Care Emergency Grants for open providers to cover operating costs such as rent, staff salaries, and cleaning supplies. Grants range from up to $2,000 for home-based providers and up to $15,000 for center-based providers based on licensed capacity. Applications are open from May 1 through June 30.

Louisiana offers a Child Care Assistance Provider Grant to programs that reopened by June 1. Grant amounts are calculated as $188 multiplied by the provider’s licensed capacity and may be used to cover any operational cost including staff salaries, bonuses, rent/mortgage, or supplies. This was the second round of grants, and the state hopes to offer a third for providers that were unable to open by June 1, if funding remains.

Oregon will offer Emergency Child Care Grants beginning July 20 for providers that have not yet received financial assistance from the state. Grant amounts vary by provider type and range from $700 to $9,360 and may only be used for costs such as paying for a lease/mortgage, utilities, insurance, food, supplies, staff compensation and benefits, and other reasonable operating costs.

New Jersey offers one-time, non-competitive Child Care Provider Health and Safety Preparedness Grants to help providers that have not received previous CARES dollars as they reopen. Grant amounts go up to $5,000 for center-based providers, vary by provider type, and are to be used for obtaining items such as personal protection equipment, thermometers, cleaning products and supplies, and other related items to meet new health and safety guidelines.

North Carolina offers one-time, non-competitive Operational Grants to help providers cover costs for the number of days they are open in June. Grant amounts vary by provider type and range from $500 to $30,000 for center-based providers, and from $359 to $2,500 for home-based providers. Amounts are based on factors including a provider’s quality rating, pre-COVID-19 enrollment, infant-toddler enrollment, and subsidy enrollment numbers.

South Carolina offers one-time, non-competitive Sanitation/Cleaning Grants to licensed providers as they reopen. Grant amounts vary by provider type and range from $300 for home-based providers to $600 for center-based providers.

States Are Using Other Funding Sources to Support Child Care

While the states above can offer providers relief beyond continuing to cover subsidies and copays, for most states, dedicated child care dollars are drying out. States like Kentucky and Washington will no longer be able to cover parent copayments and subsidies based on pre-COVID enrollment after June 30. Many providers have relied on these enrollment-based payments to cover variable attendance numbers and long-term absences. As they deplete their dedicated child care dollars, states are beginning to pull from other funding streams to aid their child care sectors, knowing child care is a prerequisite to restarting their economies.

Illinois announced a $270 million Child Care Restoration Grant funded through the Coronavirus Relief Fund created through the CARES Act. The state fully allocated its $118 million in supplemental CARES dollars to emergency child care providers.

Virginia announced on June 10 that the state will distribute $10 million from the Governor’s Emergency Education Relief Fund to help expand early childhood education and child care.

Florida announced that it will redirect dollars from its renewed $13.5 million Preschool Development Grant towards supplementing child care needs resulting from COVID-19.

Alaska will distribute $10.5 million of the $1.25 billion the state received from the Coronavirus Relief Fund to child care providers that lost revenue during April and May.

Local Governments Are Contributing To Fill Gaps

Local governments also acknowledge that dedicated child care funding from states is not enough to support the industry. On top of state dollars, counties are beginning to allocate funds they received directly from the federal Coronavirus Relief Fund to support their child care programs.

Dane County, WI. In early May, Dane County allocated $3.5 million of its CRF dollars to provide grants to reopening providers.

St. Louis County, MO. On June 3, St. Louis County allocated $5.9 million of its CRF dollars to provide grants to help providers cover health safety and business interruption costs.

Montgomery County, MD. On June 16, Montgomery County allocated $10 million of its CRF dollars to help providers reopen by August 31.

San Diego County, CA. In early May, San Diego County allocated $5 million of its CRF dollars to cover vouchers through its subsidy program. The City of San Diego matched the county with $5 million of its own CRF dollars.

Efforts to allocate additional funding on top of supplemental CCDBG dollars provided through the CARES Act reveal states and localities recognize a stable child care sector as a prerequisite to rebooting the economy, but also proves more funding is needed in order to do so successfully. Child care providers play an essential role as the workforce behind the workforce but it is clear that they need significant financial assistance to stay open and continue providing their essential service to the economy. Any future stimulus package must include significant increases in dedicated child care funding to ensure providers can stay in business despite increased costs and declining revenue, so that parents can return to work and our economy can restart.

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