Federal Relief Funds: Policy Considerations for States in 2021

February 09, 2021

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On February 3, 2021, the Administration for Children and Families (ACF) announced that the next round of federal relief funds for child care, in the amount of nearly $10 billionhas been officially awarded to states. 

Federal support for child care will play a key role in 2021 as states are beginning to tackle their budgets, which have been impacted by the pandemic’s ongoing effects on the economy. With the availability of another round of federal relief funds, states have a critical opportunity to think about what policies are most effective in supporting providers, children and their families in the short and long-term. As states consider which policies to introduce or extend, they must consider two things: how can they best support the stability of the sector now during the pandemic, and which policies will allow for sustainability after COVID-19 is no longer a threat.  

The examples shared in this blog support the child care system as it grapples with additional costs because of COVID-19 and pushes for long-term improvements needed to address problems that existed in the system before the pandemic. Advocates, including child care programs and Child Care Resource & Referral (CCR&R) agencies, can share the examples included in this blog with their lead agency staff and policymakers as innovative and effective strategies to consider implementing with new rounds of federal funding. 

How States May Spend New Relief Funds 

Nearly $10 billion in funding dedicated to child care was made available under the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act of 2021 passed by Congress in December 2020. Like the first round of federal assistance, these funds are made available through the Child Care and Development Block Grant (CCDBG) and intend to provide relief for child care from challenges exacerbated by COVID-19. These funds may retroactively reimburse expenses related to the pandemic before December 2020. There are two requirements under the new law that states must follow: (1) state agencies must make information widely available and provide technical assistance to all types of providers regarding the new funds; and (2) some funds must be made available to providers that were not receiving CCDBG funds prior to COVID-19 for supports to maintain or reopen programs.  

States have a great deal of flexibility in how they use their funds, but the law specifically highlights the following policies that states are encouraged to drive funding toward:  

  • Providing child care assistance to essential workers without regard to income eligibility requirements;  
  • Providing payments and assistance to providers in cases of decreased enrollment or closure;  
  • Paying for fixed costs and increased operating expenses;  
  • Paying the salaries and wages of staff;  
  • Providing funds for cleaning and sanitization related to the COVID-19 health emergency;  
  • Delivering technical assistance to help child care providers implement practices and policies to provide safe child care, in-line with guidance from local, state, and federal public health agencies; and  
  • Supporting other current allowable CCDF program activities, like covering family copayments and tuition and delinking provider reimbursements from a child’s absence. 

Both rounds of federal relief funding have left decisions about implementation largely up to individual states, thus, states must consider which child care policies will have the most long-term impact for providers and familiesHowever, it is clear that states need to stabilize and preserve the existing system and now and implement policies that will be effective in ensuring the viability of child care after the pandemic subsides. States will need to adopt or extend policies based upon their own unique needs, but should implement policies that provide financial and health supports for providers, children and their families and CCR&Rs. Further, the policies enacted now are an opportunity to shape what is included in each state’s 2022-2024 Child Care and Development Fund Program (CCDF) plans. 

How States Can Support Child Care Providers 

Many providers are still in danger of closing their doors because their expenses significantly increased due to pandemic-related costs while their attendance and enrollment dropped (along with their income)Child Care Aware of America’s (CCAoA) 2020 report, Picking Up the Pieces, found that 35% of child care centers and 21% of family child care programs remain closed nationwide over the summer. Taddress the challenges facing child care, states should consider policies around: 

  • CompensationOne of the most effective ways states can support providers is by using these funds to increase wages for child care educatorsthe law even actively encourages states to do so. Nearly 15% of child care workers live below the artificially low “official” poverty line, more than double the rate of other industries. Providing increased compensation or bonus pay to providers can help staff stay on payroll if a center needs to temporarily shut down or consider staffing cutsIt can also help with recruiting and retaining the child care workforce. States like Kentucky and North Carolina provided bonus payments using CARES Act funding. Georgia is following suit, announcing it will use a portion of its most recent relief funding to provide $1,000 bonuses to child care providers. 
  • Delinking Reimbursement Rates from Attendance: To keep the supply of programs open, policymakers should rethink existing child care payment structures so that they are based on capacity, not attendance. The new law encourages states to implement reimbursement policies that are based on enrollment when providers are forced to closeThis policy, which Nebraska extended in August using federal relief funding, allows providers to have reassurance to cover fixed costs when attendance fluctuates. New Jersey is continuing its reimbursement policy based on capacity through the end of February 2021. States should also consider shifting to a contract system to pay for slots as part of its longer-term stability strategy. 
  • Increasing Reimbursement Rates: ACF recommends that states reimburse providers at the 75th percentile of rates reported in the child care market rate surveys. State policymakers should consider increasing reimbursement rates with relief funds, as Pennsylvania just announced it will doIn 2020, bothTexas and Illinois provided an enhanced reimbursement rate (of 25 and 30 percent, respectively) over the usual pay rate to reflect the additional costs to child care programs of providing care in smaller groups.  
  • Stabilization Grants: Child care programs continue to need support as they struggle with additional costs because of COVID-19State policymakers should consider additional stabilization grants to help cover necessary sanitation equipment and supplies, utilities and rentlost revenue to help providers cover bills, and resume operations. Vermont is considering directing new relief funding toward an “open-ended” relief grant program to meet a wide range of provider needs.  
  • COVID-19 Health and Safety: Beyond fiscal supports, state policymakers need to ensure that the health and well-being of child care providers is maintained. Child care providers are risking their health to provide safe environments for children. COVID-19 testing will be available at locations throughout Massachusetts at no cost to childcare employees, children, and household members. While Massachusetts isn’t using federal funds to support this effort, states may want to explore this possibility. Kansas used federal funds this fall to start a new program in partnership with its CCR&R to connect providers with child care health consultants to share COVID-19 safety recommendations. 

How States Can Support Children and Families 

Not only are eligible families unable to find child care, but many families who do not qualify for assistance are still overburdened by the cost of child care. This has only been made worse by the pandemic. State leaders should consider policies around relaxing child absences and eligibility redetermination periods, reducing or permanently eliminating family copayments, increasing the income limits for subsidy eligibility, and allowing essential workers to access subsidy assistance through the duration of the pandemic.  

Illinois announced that it reduced family copayments to a maximum of $1.25 a month through February 2021, while Alaska is waiving copayments altogether through March 2021. Looking back at 2020, Kansas used its first round of federal relief funding to expand child care subsidies to essential workers by increasing eligibility for health care workers and first responders to 250% of the federal poverty level.  

How States Can Support and Strengthen CCR&Rs 

State policymakers should use federal relief funds to invest in CCR&Rs and their ongoing work to bolster high-quality child care and provide technical assistance to families and providers. CCR&Rs have been key partners in responding to the pandemic (and other emergencies) by effectively distributing cleaning supplies, PPE, and resources including grants and stipends, to child care providers. They have taken on these emergency-related responsibilities while continuing to play a critical role in connecting parents with child care and ensuring communication flows between school districts and child care when schools have needed to suddenly close. They’ve also continued to play a critical role in providing technical assistance and trainings to child care providers to navigate business sustainability. 

The language included in the Consolidated Appropriations Act of 2021 explicitly encourages states to use a portion of the funds to deliver technical assistance to help providers with the implementation of new policies. CCR&Rs are ready to provide this assistance to providers but need additional investment to carry out a host of other necessary supports. States need to ensure that CCR&Rs can continue supporting emergency response and preparedness and have funds to translate necessary materials for families and providers. This is especially true as states begin vaccination outreach. California has made the case for CCR&Rs to help with vaccine outreach and response to child care providers.  

Next Steps 

States must now work quickly to develop and submit plans detailing what these funds will support, as plans are due to the Office of Child Care (OCC) within 60 days of enactment (deadline is February 25). Guidance is still forthcoming, including information on reporting requirements, but OCC has encouraged states to work on plans that align with what is currently in statute. Child Care Aware of America (CCAoA) will update this blog with a link to OCC’s guidance when it is available.  

Active engagement will be critical in ensuring that this funding is spent in a way that best supports the needs of local communities.  Advocates should continue to make the challenges and needs of child care providers and families known to their state policymakers, and explain why long-term investment is needed over temporary changes. Stakeholders should suggest that their state make sure the needs of all providers and families are taken into consideration when considering how these federal funds are used.  Further, state decisions should be informed by relevant data regarding the current needs of the child care system, including data that reflects issues relating to access, affordability, and provider costs. Advocates can suggest that state agencies submit survey to all providers, hold stakeholder meetings to hear from providers, or hold provider listening sessions with their governors, state administrators and legislators. 

CCAoA continues to advocate for additional robust federal relief beyond this $10 billion down-payment, in addition to long-term improvements needed to address issues that existed in child care before the pandemic. Share our policy recommendations to build a better child care system in our new report, Transforming Child Care: Cross Community Voices to Inform Change, with your state policymakers. 

Partner Resources: 

Please reference the below resources to learn about additional recommendations or how the new $10 billion in federal relief funding could be used: 

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Topics: Business Operations for CCR&Rs, Policy & Advocacy, News, Coronavirus

Diane Girouard

Written by Diane Girouard

Diane is currently the State Policy Analyst at Child Care Aware. Prior to this role, Diane was a policy analyst focused on child nutrition with the Food Research & Action Center. Diane also worked as a policy analyst for several years under both houses of the New York State Legislature on the education and higher education committees.