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Supporting the Child Care Market Through the COVID-19 Pandemic

As Congress considers ways to provide relief to families, small businesses, and communities for impacts related to the COVID-19 pandemic, it needs to ensure the child care market stays open, and able to provide critical services for families and communities. Any proposals should recognize the integral role child care will play in helping to mitigate economic, workplace, and societal disruptions caused by the spread of COVID-19, including making child care workers eligible for any emergency programs implemented in response to the pandemic.

While contemplating funding and support for the economy and states broadly, and specifically small businesses and even child care providers, there are several issues that might prevent funds from reaching the child care providers that are in the greatest need now and in the future. By addressing a few important policy limitations, Congress could ensure funds are used in the most effective and efficient way and targeted to states, areas, and activities in the greatest need.

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Flexibility for CCDBG Funding Allocations

All funding appropriated by Congress for the Child Care and Development Block Grant must be distributed by the Department of Health and Human Services to states based on a funding formula set by law. This means that HHS has no ability to direct any funding to areas specifically affected by disasters, such as COVID-19, to help mitigate the impacts of such incidents on child care programs in those areas. In previous disaster relief packages (such as the Additional Supplemental Appropriations for Disaster Relief Act, 2019, P.L. 116-20), Congress has included accompanying language that gives HHS flexibility to allocate funding based on need, rather than the formula. This language could accompany any supplemental funding for CCDBG Congress considers to ensure maximum effectiveness at responding to COVID-19.

Further, we recognize that competing needs in addressing the impacts of the disease might make new funding difficult. If new supplemental funds are not readily available, Congress could give HHS the authority to re-allocate based on need already appropriated CCDBG funds that have been returned to HHS by the states, rather than sending that funding to the Treasury Department. This allows existing funds to go to the areas in greatest need and would not require additional appropriations from Congress.

Small Business Loans and Grants Eligibility

One policy discussion currently ongoing is how to help small business owners who might be more adversely affected by the impacts of COVID-19, either through loans or grants. Many child care providers are small businesses, sources of income for individuals and sources of economic growth in communities. In 2016, the child care industry was composed of about 675,000 providers, most of which were family child care and home-based providers, employing about 1.5 million workers. Any proposal considered by Congress intended to help the small business community should recognize child care providers as a critical small business sector, a backbone of the economy in many areas.

As Congress contemplates providing loans or grants to small businesses, it can ensure that child care providers are eligible for any type of assistance offered. For instance, nonprofit child care providers are currently not eligible to access Small Business Administration microloans. Therefore, any supplemental funding for this program would not reach many child care providers in need. This disparity in law already limits the amount of capital available to nonprofit providers and these issues will only be made worse due to the impacts of COVID-19.

Bipartisan legislation already exists in both the House and Senate to allow qualified nonprofit child care providers to access the same types of SBA loans that are available to for-profit providers, leveling the playing field. Regardless of the funding mechanism offered to small businesses (grants or loans), Congress could help ensure that all child care providers are able to continue operating, better serve children and families, and ultimately have a positive impact on the broader economy, if it ensures that any small business assistance can be offered to both nonprofit and for-profit child care providers alike.

Expand Eligibility for Stafford Act Programs

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) authorizes the President to provide federal assistance when the magnitude of an incident or threatened incident exceeds the state, territorial, Indian Tribal, and local government capabilities to respond or recover. The largest of these programs is FEMA’s Public Assistance Program. It provides supplemental grants to state, tribal, territorial, and local governments, and certain types of private nonprofits, including eligible child care providers, so that communities can quickly respond to and recover from major disasters or emergencies.

These funds can go to eligible private nonprofit organizations but are not available to for-profit businesses. Unfortunately, this means that many child care providers, most of which are for-profit small businesses, are not eligible to receive funding through the Public Assistance Program. To address this issue and protect the already fragile child care market, lawmakers could update the Stafford Act to allow all CCDBG-eligible child care businesses, regardless of profit status, to be eligible to receive funding through the Public Assistance Program. Child care providers will play a critical role in filling the gaps caused by school closures and providing services to the families that rely on them every day to go to work. Parents are not concerned with whether a child care provider is a nonprofit or for-profit. They are concerned with whether a provider is open and operating. Access to the Public Assistance Program means providers can stay open during the disaster and continue to stay in business after the epidemic has passed.

Child care providers impacted by the novel coronavirus should have the ability to access the resources intended to help them and their communities. Congress can ensure that funding intended for the small business community, child care providers, and for general disaster relief, can be directed to this critical industry. Any policy proposals should have an underlying goal of making it easy for states, providers, and parents to access the resources they need to stay safe and healthy, and to support the economic vitality of our nation.

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