Experts warn of federal child care funding "cliff" that could have dire consequences when pandemic support expires
MINNEAPOLIS – Experts warn the country could be on the brink of a child care funding "cliff" next month when COVID-era relief money expires.
The American Rescue Plan, a pandemic aid package, included $40 billion for the child care industry to stay afloat, including Child Care Stabilization Base Grants, or payments to providers mostly so they can pay their workers more and keep them from leaving. But that funding runs dry Sept. 30.
The consequences could be severe: The Century Foundation, a progressive think tank, estimates 70,000 programs nationwide could shutter and three million children could lose their spots. In Minnesota, that translates to nearly 71,000 children and more than 2,700 day care programs expected to close, according to the report.
An analysis by the Minnesota Department of Human Services found 96% of providers who received the grant funding said the support helped them stay open.
"They did find that both center-based programs as well as individual home providers that got the grants were less likely to close," said Jennifer Valorose, research manager at the Wilder Foundation, a nonprofit in St. Paul. "There is some indication that this infusion of money is helping folks stay open and continue to provide that important care for families."
Chad Dunkley, CEO of New Horizon Academy — the largest child care provider in Minnesota — and president of the Minnesota Child Care Association, added that the state would probably have half the child care providers today compared to pre-pandemic if not for the federal funding.
But he said Minnesota is a bright spot in the national crisis: The state legislature this year approved a similar grant program of their own, where all funding — not at least 70%, like the federal grants — must support higher salaries for educators.
Workers are hard to retain in the industry because of low pay and difficulty of the job. He called the approach "nation-leading."
"Before the pandemic we were in crisis and there was far less child care available to families than what families need. And so we have a long way to go," Dunkley said. "But I'm hopeful that what we're doing in Minnesota will prevent the biggest catastrophe that we will see in other states."
The state investment means educators at New Horizon Academy will see a "10-15% permanent salary increase" because of the state grants, dubbed the "Great Start Compensation Support" program, and will mean less of a tuition hike.
"New Horizon operates in five other states. The other states that aren't passing additional support are going to see sizable tuition increases for families if providers are going to try to keep their teachers at higher wages they've been receiving during the pandemic period," Dunkley said. "And I think you're going to see Minnesota is going to be in a better place."
A report from the Center for Rural Policy and Development found that in 2020, in the height of the pandemic, Minnesota lost more than 4,000 in-home day care spots due to closure. In-home daycare is a large provider in rural parts of the state.
The center's CEO, Julie Tesch, said the looming cliff is "scary" and called solutions to child care an engine for economic development and essential for rural parts of the state to thrive.
"You're not able to grow or sustain your local community if you do not have appropriate child care offerings," she said.
She believes it's an issue that government alone can't fix. She noted Hormel Foods in Austin starting its own child care facility for its workers, for example.
In Warren, a small town in northern Minnesota, voters there raised the sales tax 0.5% to keep child care in their community.
Editor's note: A previous version of this story misplaced a comma in the number describing how many day cares were at risk of closure. It is 2,700 Minnesota child care programs, not 27,000. This story has been updated.