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States Face a $48 Billion Child Care Funding Cliff

Throughout the pandemic, Congress passed several relief packages, resulting in historic investments in child care. When these emergency funds expire in September, 2024 states could be facing a significant funding cliff — all 50 states and the District of Columbia will be facing a potential fiscal cliff of $48 billion. If pandemic emergency funds are exhausted without additional federal funding, it will have disastrous consequences for child care providers still struggling with the lingering impacts of the pandemic, forcing the nation even further into a child care supply crisis.

Consequences of Short-Term Pandemic Relief

COVID-19 ravaged the child care industry, exposing the instability of a business model working under razor-thin profit margins and a low-paid, highly skilled workforce with high turnover rates. The passage of successive pandemic relief packages the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA), and the American Rescue Plan (ARP) was a lifeline that temporarily salvaged the industry. One of these packages allocated $24 billion to directly help providers respond to the ongoing challenges of the pandemic. This historic investment allowed many child care providers to re-open with smaller class sizes, purchase personal protective equipment and more cleaning supplies for teachers and staff, or give direct cash incentives to teachers to retain staff.

While ARP provided much-needed relief, it is short-lived. ARP’s funding runs out in September,2024. States, used to operating with a tremendous influx of child care funds, will face a daunting decrease of funding, returning to pre-pandemic funding levels. This funding has been essential to fortify the child care industry against the pandemic, helping providers to fund personnel costs, rent and facility maintenance, personal protective equipment, equipment to deal with the public health emergency, goods and services needed to resume child care, and mental health support for children and employees. After the last ARP dollars are spent and absent any additional and substantial increases in funding, child care providers will be left without the critical supports they’ve depended on to stay open and retain their staff, further plunging the nation into a child care supply crisis.

The Magnitude of the Fiscal Cliff

No state is immune. The 50 states and the District of Columbia are facing a fiscal cliff of over $48 billion. Fourteen states are facing shortfalls of more than $1 billion dollars. Texas, California, and Florida are facing the largest cliffs, potentially $5.70 billion, $4.81 billion, and $3.18 billion, respectively.

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For example, North Carolina received over $1.97 billion in Child Care and Development Funds (CCDF) in FY 2021, up from over $293 million in FY 2019. Part of the increase stems from ARP discretionary funding and child care stabilization grants, which enabled the state to distribute $340 million to over 4,000 child care centers, allowing North Carolina child care providers to compensate their workforce and salvage existing child care slots. As 2024 approaches, North Carolina is facing a cliff of $1.67 billion. Losing this funding would jeopardize years of work to stabilize the industry. Without additional funding, how will child care providers survive and continue to recover from the adverse economic effects of the pandemic?

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National Data

Child Care Funding Cliff by State



Accessible and affordable child care is instrumental if the nation is to continue to recover from the social and economic impacts of the pandemic. It is imperative that the federal government provide additional investments to ensure that states do not face such a substantial drop off. If no additional funding is forthcoming and as emergency funds are exhausted, access to quality child care will diminish, and the limited supply of child care slots will not meet national demand. Congress must act to provide a stable source of child care funding to ensure that child care systems remain viable, and that the nation does not face a worsening supply crisis.

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