Commentary, COVID-19, NC Budget and Tax Center

Federal and state COVID-19 responses fail to match scale of NC child care industry’s needs

As federal negotiations continue is search of an agreement on a fourth COVID-19 relief package, child care providers in North Carolina wait to hear what funds will be made available to stabilize their industry. The House’s proposal includes only $7 billion in Child Care and Development Block Grants (CCDBG) within the $3 trillion HEROES package. The Senate’s HEALS Act proposes only $5 billion for CCBDGs along with $10 billion in less flexible “Back to Work Child Care Grants.” Both proposals are a fraction of the $50 billion that child care advocates say is needed, and while the House recently passed the $50 billion Child Care Is Essential Act, the legislation faces long odds as a stand-alone bill in the Republican-controlled Senate

Both HEROES and HEALS fail to acknowledge the scale of challenges within a child care system that policymakers have allowed to operate in financially precarious conditions for years. Providers’ ability to cover the true costs of care is dependent upon parents’ ability to dedicate large portions of their income to child care costs (25% on average in North Carolina). This system results in low pay for early childhood educators, limited access to health care, and challenges in investing in many other aspects of quality care.

The North Carolina Department of Health and Human Services (NCDHHS) has taken important steps to respond to the industry’s needs. Using $118M in CARES Act funds, $20M in emergency funding allocated by the General Assembly in July, and $48M from prior year one-time funding, the department has been able to provide emergency subsidy support, educator bonuses, and operational grants to keep providers afloat.

In the context of chronic underfunding, lost revenue, and increased costs, however, these supports were only sufficient to provide aid through the month of July. With NCDHHS data showing most child care programs operating at 50% vacancy rates and only 35% of private-paying children in attendance (compared to 70% of subsidized children), providers’ dependency on lost tuition fees will push them toward permanent closure without additional state and federal aid.

The crisis has made clear that our economy cannot work without a sustainable and equitable system for providing quality care for the youngest North Carolinians. Child care providers and their staff stepped up in the early days of the pandemic to provide care for the children of other essential workers, at great cost and personal risk. The shuttering of these small businesses will only prolong and deepen the COVID-19 recession, contributing to additional layoffs, fewer care options, and potentially pushing parents out of the labor market. Federal and state funding must match the scale and urgency of the child care industry’s needs to stabilize and strengthen this core component of our economic infrastructure.

Sally Hodges-Copple is an intern with the N.C. Budget & Tax Center, a project of the North Carolina Justice Center.

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