Reviewing State Policies: Supporting Financial Stability for Providers

June 18, 2020

provider in classroom

The COVID-19 pandemic continues to highlight the vital role child care plays for millions of children and families, especially for those who work on the front lines of the crisis. Unfortunately, COVID-19 is also underscoring the precariousness of high-quality, affordable, and accessible child care – the result of years of underinvestment in the system.

State policies play an important role in exacerbating or mitigating these factors.

While the pandemic reached states and local communities at different times in Spring 2020, by the end of March many governors released Executive Orders that took one of two approaches to address child care: (1) they allowed child care programs to remain open, or (2) they closed child care programs, except for those that provided emergency care to children of essential workers. Just one state — Rhode Island — suspended child care operations statewide. States have since enacted additional policies to help reduce the number of providers closing their doors and support families in accessing child care as they are called back to work. However, many of these policies are temporary and are not expected to be extended as governors reopen states. There are notable exceptions. Strong state leaders in Illinois, New Mexico and Oregon prioritized child care during the pandemic and have enacted robust policies to support the system that other states should consider replicating.

This is the first blog post in a three-part series that takes a deeper look at statewide policies that have been enacted throughout the pandemic. As states are reopening, policymakers should consider implementing or permanently extending the policies outlined in this series to support child care. Stakeholders can use these blog posts to learn about creative solutions other states have enacted and advocate for the long-term adoption of similar solutions in their own states.

State actions that address financial stabilization for providers

A March survey of providers by the National Association for the Education of Young Children (NAEYC) estimated that over 100,000 child care programs across the country could close due to the pandemic, with many more operating at significantly reduced capacity. Just 27 percent of providers in that survey reported they could survive closure for just one month, showing how critical additional funding is to provider viability. A Congressional Research Service Report reiterates that the Child Care and Development Block Grant Act (CCDBG) encourages lead state agencies to make payments to providers based on enrollment rather than attendance, few have shifted their payment models to reflect this, which leaves providers with little reassurance when attendance fluctuates. Providers also face new, additional costs during the pandemic; for example, many are desperately in need of sanitation equipment and supplies.  Without additional resources and supplies, providers may ultimately close.

To address these concerns, states have enacted various policies to support the financial stability of providers. In Vermont, child care providers receive an additional $125 per week for every child of an essential worker they serve. The money can be used by the provider for any program needs beyond tuition. Other states have made emergency grants available to help cover necessary sanitation equipment and supplies, hazard pay for educators, utilities and rent, and lost revenue to help providers cover bills, pay staff and resume operations. Minnesota tapped its state’s trusted Child Care Resource and Referral agency (CCR&R) to help deliver technical assistance and administer emergency grants to providers since they have existing processes and infrastructure in place to do so.

One common policy shift among states has been to temporarily adjust payment policies so reimbursement to providers in federal and state subsidy programs is based on enrollment, rather than attendance. Some states have also continued to pay subsidies to providers when children are absent or providers are closed, to help fill financial gaps. States such as Texas and Illinois have 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. 

It has never been more important for states to consider policies to support the long-term sustainability of the child care system. Child care was operating on extremely thin margins even before the pandemic, and now states need to strengthen funding to the system so it is available to support the reopening of economies across the country. Policymakers must consider extending temporary policy shifts to provide overdue support for providers, including increasing reimbursement rates and maintaining subsidy payments based on monthly enrollment, not attendance. Policymakers should also consider gearing funding and contracts for providers to be based on capacity as a better way to respond to attendance fluctuations. States need to provide and extend stabilization grants to child care programs, which can fill gaps created by shifts in the private-pay market or respond to lower enrollment and attendance.   States must build off these temporary policies and assess what other supports are needed to keep the child care system afloat.

Topics: Business Operations for CCR&Rs, Policy & Advocacy, 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.