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State Challenges to Spending Historic Levels of Child Care Funding

In March, Congress passed the American Rescue Plan, which included an historic increase in funding for child care. It included $38 billion for child care. This is  ten times the amount of money provided in the 2020 December COVID-19 relief package and significantly more money than has ever been provided by the annual, federal appropriations process. For reference, that is roughly $5.8 billion, which, while greatly appreciated, has been challenging to maneuver for state child care administrators and state bureaucracies before ever reaching providers and families.

The ARP included:

  • $14 billion appropriated through the Child Care and Development Block Grant; and
  • $23.97 billion appropriated through a new child care stabilization fund.

Attached to this new funding was an added sense of urgency for states to quickly spend the stabilization money. There was a provision in the ARP requiring obligation of the money within the next two years and a requirement that states report to the Department of Health and Human Services by December 2021 whether they can spend 50% of their allotted stabilization funding.

Considering the strains COVID-19 has placed on families – especially women – and the child care sector, it is understandable that Congress, providers, and advocates wanted to see the money allocated and spent quickly to get to the families who need it most as soon as possible. And while some state agencies can work expeditiously, others have been faced with legislative obstacles that make it difficult to authorize spending the money in a timely manner.

According to 2021 data from the National Association of State Budget Officers, and displayed in the table below, 40 states can spend unanticipated funds without legislative approval, but 29i states report that there are limitations on this authority. For example, in Oregon, the executive branch is required to make a request to the legislative branch to increase any expenditure authority. In a previous 2015 report, 19 states reported needing legislative approval before spending any unanticipated funds, indicating more states have instituted these processes.

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Most recently, some states faced challenges in spending the $10 billion provided for child care in the December aid package. In Idaho, despite the state receiving $58 million in child care funding from the December relief deal, the state legislature only authorized the Governor to spend $24 million, or half of what the federal government gave the state, while the remaining funding was allocated as a state budget line item that couldn’t be spent until July 2021.

These checks and balances at the state-level, while important for accountability, could further complicate the ability for executive agencies to spend the new ARP funding quickly. The full implications are still yet to be determined. As of October 18, only 25 states had posted their ARP plans explaining how they will use the federal funds. Of the 29 states with potential legislative restrictions, 15 have publicly posted how they will use their ARP stabilization funds.

Because state child care administrators are in the midst of managing an unprecedented amount of money, understanding their potential challenges and creatively considering how to support their efforts should be a priority as they expend the funds from the ARP. As states work through these obstacles, it is important for federal policymakers to understand these policies and how they will interact with the requirements under the American Rescue Plan.

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