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Support Child Care Sector’s Immediate Needs and its Sustained Success: Congress Can and Should do Both

As Congress prepares for a robust legislative schedule in the first 100 days of President Biden’s tenure, members of Congress and the administration must consider the invaluable role of the child care sector, which ensures our nation’s workforce and economy can thrive. Parents and child care businesses are still in the throes of the pandemic and it is imperative that Congress implement a comprehensive, two-fold response:

  1. address the continued, immediate need for an additional $22 billion in short-term relief; and
  2. take action to lay a strong, sustainable foundation so that the child care industry can make a successful recovery.

Our country continues to experience the pandemic’s devastation of an already fragile child care industry. While the $10 billion provided in the December funding package was sorely needed, it was intended as a down payment to sustain the sector for three months. Unfortunately, this down payment does not make any specific investments in the needs of parents who will rely on child care to return to work in the coming months. Therefore, Congress should pass legislation with an additional $22 billion for child care through CCDBG: $16 billion in emergency relief funding for the child care industry and $5.9 billion to support working parents.

In addition to providing short-term relief, Congress should work to remedy the pre-existing challenges that the child care sector faced before pandemic. Unfortunately, the gap in affordable, accessible child care is not new. In addition to the shortage of child care slots, child care providers operate their businesses on slim margins and struggle to pay their workforce much more than minimum wage. Parents, unable to afford to spend more than $200 per week on child care, cannot make up this difference in providers’ budgets. The child care sector primarily relies on the federal Child Care and Development Fund (CCDF) which is divided into two funding streams: discretionary funding under CCDBG and mandatory funding under the Child Care Entitlement to States (CCES). To better support the sustained success of parents, children, and the sector, it is imperative that Congress bolster both funding mechanisms and include an additional annual increase of at least $3 billion to CCES.

By leveraging bipartisan energy to establish longer-term systemic fixes to support both parents and providers, Congress can re-establish the sector and build child care back on a better foundation than before the pandemic by taking the actions outlined below.

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Provide $22 Billion in Immediate Relief to Programs and Working Parents

  1. Include $16 billion in emergency relief funding to ensure that child care programs and providers can successfully survive the pandemic. Changes in our economy and additional infusions of funds have helped most child care providers stay afloat in the near-term. However, they continue to experience ongoing challenges such as increased costs, lower enrollment rates, and staff shortages. As the realities of the pandemic continue, immediate assistance is imperative if providers are to remain in business. Without access to child care, parents, and especially working mothers, with young children are unable to successfully search for or keep a job. Our economic future depends on the stabilization of the child care sector.

  2. Support working parents by investing $5.9 billion in the Child Care and Development Block Grant, twice the amount of funding appropriated in FY21. In 2018, 1.3 million children were provided a CCDBG subsidy. In 2017, the average direct service expenditure per every child served was $2,700 annually. The program serves fewer than 20% of all families that are eligible and only covers a portion of the total cost of child care. Doubling the funding to $11.8 billion means nearly twice as many children, 2.3 million, would be served and the average expenditure per child could increase to $4,000.

Ensure Recovery is Sustainable

  1. Make a significant investment to CCES by implementing an annual increase of $3 billion. Some low-income families can access federal subsidies through CCDF, but the program serves fewer than 20% of all eligible children, leaving millions without assistance. While Congress must continue making discretionary investments in CCDBG, a permanent increase in CCES would provide year-over-year stability for states, working parents, and the child care industry. An increase in CCES is one of the most essential avenues available to Congress to ensure the child care sector charts a path to successful recovery for families and child care businesses in the years to come.

  2. Establish $10 billion in grant funding to invest in new child care facilities and renovate existing ones. As noted, the need for child care and early learning facilities far exceeds the supply of existing programs. Increasing the capacity and supply of high-quality child care settings is essential to strengthen our economy, especially as we recover from the COVID-19 pandemic. Operating on slim margins, existing child care businesses have limited financial means to pay for expansions, renovations, or upgrades to facilities. Consequently, this investment from Congress is key to increasing our nation’s supply and setting up parents and the child care sector for long-term success.

  3. Expand and make the Child and Dependent Care Tax Credit (CDCTC) fully refundable to better help working parents and reflect the reality of high child care costs. The CDCTC allows eligible taxpayers to offset a portion of their child and dependent care expenses that are necessary for them to stay employed. Unfortunately, taxpayers with little or no income tax liability receive few benefits from nonrefundable tax credits including the CDCTC, despite having limited disposable income to pay for child care. Further, the maximum credit comes nowhere close to covering the high costs of care. Doubling the amount of child care expenses eligible for the credit to $6,000 for one child (under age 5) and $12,000 for two or more children (under age 5) and making the credit fully refundable will ensure more working parents can afford child care.