Introduction and summary
If a budget reflects collective values, surely programs for young children should be high on the list of priorities. Decades of research show that affordable, high-quality child care supports family well-being, increasing not only financial stability1 and workforce participation2 but also children’s early social, emotional, and cognitive development,3 which sets them up for success in school and beyond. As more than two-thirds of U.S. children younger than age 6 have all available parents in the workforce,4 lack of access to child care has significant economic consequences.5 Early learning programs—which provide high and lasting economic and societal returns6—are thus some of the most important investments the United States can make.
Early learning programs—which provide high and lasting economic and societal returns—are some of the most important investments the United States can make.
The Biden-Harris administration’s 2021 American Rescue Plan Act (ARPA) provided a lifeline to the nation’s child care sector, which already had been facing widespread vulnerabilities before getting hit hard by the COVID-19 pandemic. The global crisis that ensued exacerbated existing challenges related to funding, staffing, and access. Although the child care workforce has recovered to its pre-pandemic employment levels nationally,7 the overall sector remains vulnerable and undercompensated8—the result of structural inequities and inefficiencies that reflect a history of policymaking that has undervalued children, families, and educators. With the influx of these temporary federal investments, however, many states made significant strides in expanding eligibility, raising provider payment rates, increasing educator compensation, and reducing lengthy waitlists for much-needed child care.9
The recovery that the child care sector saw with the aid of pandemic-era funding, as well as the challenges many states have faced with the expiration of these temporary investments, showcase how necessary these public resources are.
The recovery that the child care sector saw with the aid of pandemic-era funding, as well as the challenges many states have faced with the expiration of these temporary investments, showcase how necessary these public resources are. Thoughtful, resourced policy decisions are crucial in order for the child care sector to meet families’ needs while keeping costs low, investing in the retention and well-being of the workforce, and providing high-quality care.
Thoughtful, resourced policy decisions are crucial in order for the child care sector to meet families’ needs while keeping costs low, investing in the retention and well-being of the workforce, and providing high-quality care.
States were able to implement meaningful changes to the child care system with the aid of federal relief dollars, and the administration and many state policymakers have taken steps since then to continue the momentum and address continued gaps in the sector. But the child care system is still vulnerable, and it will take leaders at all levels of government optimizing current programs and providing robust funding to effectively support the child care workforce and to expand access to affordable, high-quality child care.
Pandemic-era child care funding highlighted the power of public investment
The child care sector has long been characterized by gaps between what parents are able to pay and the high cost of providing high-quality care,10 leading to an extremely supply-constrained system rife with child care deserts,11 persistently high prices for parents, and abysmal working conditions and pay for early educators.12 The onset of the pandemic worsened these vulnerabilities.13
Historic investments through the ARPA were essential in supporting the sector’s recovery and keeping doors open during the pandemic, but mounting challenges after the temporary stabilization grants ran out have forced child care providers to increase tuition for families, reduce employment, and reduce the number of children they can serve.14 And since the supplemental Child Care and Development Block Grant (CCDBG) funding expired on September 30, 2024,15 the sector has even fewer resources to support families’ access and to continue to provide child care.
The United States prioritized children and families during this crisis, and Americans saw, in real time, the positive impact that this choice had on the child care sector, the workforce, family well-being, and the economy overall.
The nation’s overall economy would not have recovered from the COVID-19 pandemic were it not for the investments made in the child care sector. The United States prioritized children and families during this crisis, and Americans saw, in real time, the positive impact that this choice had on the child care sector, the workforce, family well-being, and the economy overall. A 2022 analysis by Wells Fargo economists shows that the lack of affordable, accessible child care can make hiring more difficult and expensive for industries across the economy.16
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Although federal relief funds have waned, some states have committed to continuing the progress they made in addressing child care challenges. Examples from these states further demonstrate that public dollars are necessary to address the child care crisis.
Examples of state innovations
More than 80 percent of licensed child care providers across the country—more than 225,000 programs—received ARPA funding. That money helped serve an estimated 9.6 million children.17 In 2023, more than one-third of child care directors reported that their program would have closed permanently without federal stabilization dollars.18 Though the ARPA was designed to meet a limited, short-term need, many states used funds to address program access and affordability that has laid the foundation for future state investments and systemic changes to the sector. Among those efforts, states:
- Expanded income eligibility limits. Georgia, Illinois, Indiana, Kansas, Michigan, New Hampshire, New Mexico, and Virginia all increased income eligibility to families or waived their child care copayments altogether.19 All told, the combined ARPA funds were used to lower child care costs for more than 700,000 children.20
- Invested in early educator compensation. Connecticut and Nevada used their funds to increase educator wages. Other states, including Alabama, Delaware, Georgia, Illinois, Kansas, Maine, Michigan, Montana, New Jersey, Oregon, and Tennessee, used their funds to provide recruitment and retention bonuses and job benefits such as health coverage or paid leave time.21 Flexible grants through the ARPA enabled states to increase compensation for more than 650,000 child care workers22—a critical step in stabilizing a sector characterized by dismally low salaries for early educators and poor or no benefits.
- Streamlined administrative processes. Several states—such as New Jersey and New York, which adjusted their payment rates; Tennessee, which used funds to provide early educators with digital hardware and technical assistance; and Maine and Utah, which facilitated program licensure by providing grants for facilities improvements and fees—used their funds to improve program administration.23
- Invested in supply-building efforts. ARPA funds enabled states to make crucial investments that created an estimated 300,000 new child care slots.24 States—such as Kentucky, which used funds to provide startup grants for family child care centers; Texas, which offered awards to providers establishing programs in child care deserts; and Pennsylvania, which offered incentives to providers to offer care during nontraditional hours—took measures to invest in supply, particularly for families that need the flexibility and affordability of home-based care and those living in areas with limited access to a program.25
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While some states work to build on their momentum, others regress
Despite the notable progress many states have made to invest in their child care systems—increasing supply, moving toward fair and dignified wages for the workforce, bringing down costs for families, and reducing administrative burdens26—still others have not continued the momentum from pandemic-era funding and now see a backward slide that puts families’ access to child care services in jeopardy.27 Without an ongoing commitment of federal dollars, families living in states that have not dedicated increased funding to their child care systems will see increasingly restrictive eligibility limits, lengthier waitlists, high copayments that create significant cost burdens, and increased turnover and workforce shortages among early educators. For example, between 2022 and 2023, four states did not raise their subsidy income eligibility limits to keep pace with inflation and two actually reduced their limits, further restricting families’ access to child care assistance.28 In that same time period, the number of children on waitlists increased 36 percent and copayment rates for a family of three at 100 percent of the federal poverty level increased in 18 states, driving up costs for families already seeking support for care.29 In 2023, child care costs still exceeded those of college tuition, transportation, food, and health care in all parts of the country by as much as tens of thousands of dollars per year.30
ARPA funding had measurable impacts on the child care sector, and it is evident that the federal government can come together with families, providers, communities, advocates, and state leaders to generate meaningful changes.31 Absent that support, the experiences that families and educators have will continue to vary drastically by geography and circumstance.
Hearing from the early childhood community
State administrators who made concerted efforts to engage their stakeholder communities in the policymaking process were more successful in establishing implementation plans that targeted ARPA resources to those most in need, including low-income communities and Black, Latino, and other communities of color.32 Officials in North Carolina, for example, reported that increasing communication with child care providers in the state was essential to building a trusting relationship based more on the delivery of services than on strict compliance.33 Officials in Michigan likewise found stakeholder engagement crucial for streamlining implementation and for connecting with providers across their child care sector to conduct follow-up technical assistance.34
Executive commitments reflect the administration’s priorities related to child care
The Biden-Harris administration has demonstrated time and again that child care and early learning are a priority. In April 2023, the administration introduced an executive order that called for state lead agencies to act within their existing authorities to make child care more accessible and affordable for parents and to better compensate educators.35 Among other actions, the order included a call to establish pay parity between Head Start educators and similarly credentialed elementary school teachers; to increase care workers’ access to health insurance coverage; to improve administration of the Child Care Access Means Parents in Schools program; to provide incentives for the child care sector to recruit and retain qualified educators; and to implement strategies that support early educators’ mental health, professional advancement, care training, and educational attainment.36
Building on the executive order, two new federal rules finalized this year include improvements to the administration of both the Child Care and Development Fund (CCDF) and Head Start. On March 1, 2024, the Administration for Children and Families finalized a rule that makes regulatory changes to CCDF to reduce costs for subsidy-participating families, improve provider payment rates and practices, and simplify enrollment for eligible families.37 On August 21, 2024, the Office of Head Start also finalized a rule to add requirements to the Head Start Program Performance Standards to support and stabilize the Head Start workforce, including through increased compensation and improved benefits over a gradual compliance window, enhanced mental health and wellness support for Head Start education staff, modernized data equity practices, and an improved Head Start home visiting model.38 Efforts to engage stakeholders through the rulemaking process were essential for revising both the CCDF and Head Start rules to extend compliance timelines and other programmatic standards to better suit the needs, and reflect the constraints, of child care providers and Head Start grantees.
Though the rules do not come with additional funding—that happens through congressional appropriations—they still represent an effort by the Biden-Harris administration and federal officials to enhance the quality, accessibility, and administration of two key early learning programs on which thousands of families depend. Congress must make robust investments in the child care sector to support implementing these rules and continuing the momentum toward a sector that supports the needs of children, parents, educators, and providers.
Even in a tight budget climate, programs supporting young children must be prioritized
Congressional child care champions have repeatedly secured increases in investments for early learning programs, even amid a tight budget climate: The spending package for fiscal year 2024 contained a $1 billion funding increase for child care and early education despite a tough fiscal climate that involved austere spending caps.39 In July 2024, the House Appropriations Committee on Labor, Health and Human Services, Education, and Related Agencies (LHHS-Ed) proposed FY 2025 funding levels that would amount to a cut of nearly 11 percent below FY 2024;40 the Senate LHHS-Ed bill released in August, by contrast, included a $2.3 billion increase in funding for early learning programs.41
Perhaps most crucially, the Senate LHHS-Ed bill42 garnered bipartisan support during a demonstrably tight budget year, showcasing a moment in congressional politics when leaders united to prioritize the needs of children and families through programs on which hundreds of thousands of families depend. That bipartisan support is echoed among voters: Across political lines, 93 percent of voters believe affordable and quality child care programs are important, and 74 percent believe that increasing funding for child care and early childhood education is a priority even when considering the federal deficit.43 A July national survey from the Save the Children Action Network found that a majority of voters, including undecided voters (60 percent), say that Congress should increase federal funding for child care and early learning programs. Many surveyed voters said that increasing affordability and access to high-quality child care would give families the ability to “make choices that best meet their needs” (91 percent), would “help working families better manage the high cost of living” (89 percent), and would “help parents secure their children’s futures” (84 percent).44
Recommendations
The child care system needs a robust overhaul in order to scale services to meet families’ needs, bring down costs, and make much-needed investments in the early educator workforce. But federal spending through the ARPA and the commitments congressional leaders have made through appropriations showcase how even incremental steps can have meaningful impacts on the sector. Momentum must continue, at all levels of government, toward securing additional resources; maximizing the use of existing programs; and working toward the ultimate goal of an inclusive, comprehensive, mixed-delivery child care system.
Congressional leaders
Any functioning program or system needs adequate funding to meet the needs of both participants and providers. For the child care sector, that means both addressing the limitations of and making sustained investments in existing programs such as the CCDBG and also considering longer-term solutions that support the child care workforce, build supply, bring down costs for families, and invest in quality while reducing administrative burdens for providers. As the needs of the sector continue to outpace investment, and as the last of pandemic-era funding has expired, federal policymakers must recognize that a broken market cannot recover if left to its own devices. And if states alone must shoulder the burden of maintaining their child care sectors, families’ access to care, providers’ ability to operate, and the well-being of the early education workforce will vary drastically from state to state.
Congress plays a unique role in addressing the fundamental structure of the child care system that keeps wages down, prices up, and access limited.
Congressional leaders should also look to legislative opportunities that will advance a sustainable, equitable child care and early learning system. The Child Care for Working Families Act, last reintroduced in May 2023, would provide the resources needed to expand access to high-quality care and early learning by investing in education staff; capping family copayments at 7 percent of their income—the federally recognized standard for affordability45—making child care free for families earning below 85 percent of their state’s median income; and establishing Building Affordable System for Early Education grants for states that create flexibility in the market for families to select the care type that works best for them.46
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Congress plays a unique role in addressing the fundamental structure of the child care system that keeps wages down, prices up, and access limited. Robust, sustained federal investment is key to bridging the gap in the broken market between what providers need to operate at scale and what families can afford to pay.47
Federal administration
Though limited because of how federal programs are funded, the administration is a key lever for setting a domestic agenda for care, communicating those priorities through the president’s annual budget proposal, and using executive actions to encourage federal agencies to address issues related to care within their authorities. The administration can also convene power and garner broad awareness of and support for early learning by visiting child care programs or by inviting child care providers and parents to the White House to share their experiences in a system that disadvantages them both. The Biden-Harris administration has already demonstrated a strong record of support for the child care sector, including through bold proposed investments in President Joe Biden’s FY 2025 budget. This proposal included a $600 billion investment over the next decade in mandatory child care and universal preschool funding that, if implemented, would guarantee affordable child care for families making up to $200,000 per year.48 Under this proposal, key programs such as the CCDBG and Head Start would also see a $500 million and $544 million increase over FY 2023, respectively.
The CCDF and Head Start final rules likewise represent crucial actions by the Biden-Harris administration to mitigate systemic shortcomings in two of the most prominent federal early care and learning programs serving vulnerable children and their families. However, to ensure eligible families can access these programs, policymakers must close additional gaps in program administration to increase enrollment, invest in the workforce, build supply to give parents greater choice of programs that suit their children’s and families’ needs, and encourage provider participation to improve services for low-income families.
The Biden-Harris administration has set a foundation for continued efforts next year to invest in the nation’s care infrastructure and to extend affordable care to more families in need.
State policymakers and officials
State leaders play a key role in sustaining and expanding their child care sectors, particularly in the absence of federal action, and in implementing federal funding, overseeing licensing and regulation, and setting standards around quality of care. State policymakers and administrative officials are therefore critical to continuing the momentum generated by providers, parents, advocates, and organizers to bring down costs for families, invest in the workforce, and build supply, especially in low-income communities, rural communities, and communities that qualify as child care deserts.49
The ARPA, though temporary, has inspired states to commit greater sustained funding to their child care sectors or provided a foundation upon which state leaders can sustain policy changes they have made since the ARPA’s implementation. In New Mexico, for example, ARPA funding came at a time the state successfully passed a ballot measure that dedicated $150 million annually to child care and early learning programs, made child care free for most families in the state, and raised educator wages by $3 per hour.50 States should look to further this commitment and to continue the momentum by expanding services to more families seeking care, investing in the workforce, and building supply that reaches vulnerable communities.
Read more about child care deserts
State leaders can also optimize existing programs to address administrative barriers and invest in quality, including through the Preschool Development Grant Birth through 5 (PDG B-5) program. First authorized under the Every Student Succeeds Act in 2015 and currently funded at $315 million for FY 2024,51 PDG B-5 awards funding to states and territories with the goal of developing, enhancing, and expanding their early care and education systems. Coordination among the various early childhood funding streams is a primary goal of PDG B-5, which is the only federal program specifically authorized to increase collaboration and quality across child care, Head Start, state prekindergarten, home visiting programs, and the various state agencies that oversee these programs. PDG B-5 helps ensure that early care and learning systems are as streamlined and efficient as possible. For example, New Mexico used the grant to establish the Early Childhood Education and Care Department (ECECD), a Cabinet-level department tasked with overseeing all early childhood supports and services.52 One of only four departments of its kind in the nation, the ECECD developed the Early Childhood Integrated Data System to coordinate and integrate early learning data. In Kansas, grant funding was used to provide technical assistance to communities to improve coordination across Head Start, child care, and early intervention programs.53 Ohio, using a needs assessment, is providing PDG B-5 subgrants to expand services in rural areas and to increase access for low-income children and to families needing infant-toddler care.54
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Policymakers can also support existing Head Start-child care partnerships in their state. By extending the Head Start program’s reach through an existing network of providers and supporting the provision of higher-quality care, these partnerships not only increase access to child care services for the costliest age groups but also serve as a model for how different programs within the child care system can better interact to expand options for families who need child care services. These partnerships enable child care providers to offer more flexible care to families, including full-day and full-year services, and participating providers have cited feeling that the partnership better supports their ability to provide care that reflects the cultural and linguistic needs of the communities they serve.55 States including Alabama,56 California,57 Delaware,58 Georgia,59 and Pennsylvania,60 as well as Washington, D.C.,61 have adopted this model.
Child care is fundamental infrastructure for any functioning society, and voters across the political spectrum want a robust system that works for providers, educators, and families.
Conclusion
Child care is fundamental infrastructure for any functioning society, and voters across the political spectrum want a robust system that works for providers, educators, and families. Investments in early childhood can pay off over a lifetime, and child care and early learning programs represent a unique opportunity to reach children at pivotal periods of development. However, unlike K-12 education, emergency services, roads and bridges, and national defense, child care remains excluded from the list of publicly funded goods generally considered worthy of robust investment. Federal programs designed to increase child care access among low-income families suffer from historic underinvestment and structural limitations that affect their ability to meet the needs of eligible families, leaving many parents and caregivers to patch together services that are costly, hard to access, or not what they would optimally choose for their children. Both the Biden-Harris administration and state policymakers have taken steps to address the shortcomings of the existing sector, particularly with the infusion of ARPA funds, but it will take leadership at all levels of government to create a sustainable, high-quality child care system that works for all families now and in the future.
Acknowledgments
Bri Crawford served as CAP’s Education department intern in early 2024 and contributed significantly to the research and development of this report. The team is grateful for her partnership.
The authors would also like to thank Julie Kashen, Erin Grant, and Jared Bass for their fact-checking and invaluable feedback on this report.