Many states have made progress on supporting child care access, affordability and quality during their 2023 legislative sessions. These actions are particularly noteworthy as just over half ($28.49 billion) of federal relief funding approaches its spending deadline on September 30, 2023, less than a month away.
An Opportunity for State Investments in 2023
There are multiple factors contributing to the progress made this year for child care across states. Given the odd-numbered year, all states were in session, which instantly provides a window of opportunity for state advocates in every state to make policy and budget recommendations. In 2023, 47 states were scheduled to approve either a one-year (31 states) or two-year (16 states) budget in a year when the National Association of State Budget Officials (NASBO) found that states overall remained in a strong fiscal position due to federal relief funding, double-digit revenue growth in the two prior fiscal years, record-high levels of rainy day funds, and better-than-expected tax collections. NASBO finds that 33 states reported revenues above initial projections for 2023, seven were on target and only one state reported revenue lower than forecast (nine states were unable to report data).
In a healthy budget year, it's hard for policymakers to ignore what’s on the minds of voters. Across the country, there continues to be substantial voter support for funding child care and early learning. A nationwide poll conducted on behalf of the First Five Years Fund in July 2023 found that a vast majority (93%) of voters across party lines continue to believe it is important for working parents of young children to be able to find and afford quality child care programs. A significant number of voters (74%) continues to support increased federal funding for child care and early learning programs. In a recent Kentucky-based poll, an overwhelming margin of voters (72%) and parents (81%) support investing more taxpayer money to increase access to high-quality child care programs.
And, of course, the exhaustion of federal relief funding for child care is emboldening states to continue policies initially started with relief funding with new state general funds. By September 2023, states are required to liquidate the Coronavirus Aid, Relief, and Economic Security Act (CARES), the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA), and stabilization grants funded under the American Rescue Plan (ARP) Act—a total of $28.49 billion. By September 2024, states must liquidate the ARP Act’s supplemental CCDF funding ($23.98 billion).
A Successful Start to Session
As the pot of remaining federal relief funds rapidly diminishes, some states are continuing policies initially funded with pandemic funds with state general funds. We saw this unfold in 2022 in the absence of additional large-scale investments made by Congress. This trend continued in 2023. To start the year, at least 22 governors included the need for child care investments in their State of the State addresses. In states like Illinois, New York, Vermont and Wisconsin, child care investments were a key component of governors’ opening addresses. Following their State of the State addresses, governors in Hawaii, Maine, Missouri, North Dakota and Ohio included child care investments in their budget proposals (check out our All Eyes on States 2023 blog for more beginning-of-year facts).
There were multiple states who made progress in 2023, especially with state general funds:
- Alabama lawmakers approved the largest ever year-over-year increase in state funding for early care and education. Legislators approved a combined $42 million increase in investments in Alabama’s preschool program and the Alabama Quality Stars child care rating and improvement program.
- Alaska's final budget included an increase of $7.5 million to increase wages for child care workers and stabilize child care provider operations. This represents the state’s largest investment of general funds in decades.
- California's budget allocated $6.6 billion for child care in its 2023-2024 state budget, including $2.9 billion in new funds. Of this funding, California included $1.36 billion over two years to address reimbursement rates for providers in alignment with a ratified Child Care Providers United agreement. The final budget also included funding to providers based on enrollment through September 30, 2023, rather than attendance, as well as an agreement to implement a new rate methodology in the FY 2025-2026 budget. Starting in October, family copayments will be waived for all families earning less than 75% of state median income (SMI), rather than 40% SMI, and copayments will be capped at 1% of monthly income for families earning more. The state has also made permanent a $10 million increase to support CCR&Rs. Unfortunately, California’s finalized budget delayed funding until 2024-25 for 20,000 new child care slots that would have otherwise been funded in 2023-24, though thousands of newly available slots since 2021-22 still need to be filled.
- Illinois included $300 million in new state funding for child care, including $250 million to fund the first year of Smart Start Illinois, the governor's early childhood initiative to eliminate preschool deserts, stabilize the child care workforce and expand the Early Intervention and Home Visiting programs.
- Louisiana invested an additional $52 million this year toward the state’s subsidy program, which is the largest investment of state dollars into the program in well over a decade. Notably, after the Louisiana House cut subsidy funds to only $44 million, Governor Edwards restored back $7.5 million, for a final total of $52 million.
- Maine's legislative session made historic child care investments, including additional funding for the state’s child care worker stipend, which was first implemented using federal relief funding and then bolstered with state general funds last year. Maine invested an additional $15 million annually to double wage stipends to average about $400/month, bringing the wage supplement investment to around $30 million annually. Maine’s budget also includes $2.5 million annually to include child care staff in the state’s subsidy program. The budget also invested about $10 million annually to increase eligibility for the child care affordability program from 85% to 125% SMI (states must use their own funding if they choose to go above the 85% SMI federal threshold). The initial year of the program is funded at half-year with $4.86 million in FY 2023-2024, and $10.21 million in FY 2024-2025.
- Massachusetts' final state budget included nearly $1.5 billion for early education and care, including $475 million in new state funding for the Commonwealth Cares for Children (C3) grants to child care providers. This historic funding level represents a $268 million, or 22%, increase over last year’s budget. This also includes an $85 million increase from FY 2023 for funding the state’s subsidy program and a $25 million increase from the prior year to invest in program quality, workforce salaries and increasing the number of programs that accept subsidies.
- Michigan's final budget included investments largely for preschool (and not the broader child care system), which included $90.8 million in new state funds to increase the per-pupil grant and eligibility threshold for the Great Start Readiness Program (GSRP) for 4-year olds. In new funds, $18 million was invested for expanding transportation for GSRP, while $15.8 million was invested for piloting additional sites for GSRP for 3-year olds.
- Minnesota made historic progress in supporting its ECE workforce through several new investments. First, the legislature allocated $316.1 million in new state funding for the 2024-2025 biennium (and $259.7 million in 2026-2027) to establish the Great Start Compensation Support program, which will support monthly payments to child care educators to increase compensation and stability in the sector. These payments build off the current Child Care Stabilization Grants, which were started during the pandemic with federal relief funding. The legislature also allocated $42.5 million to transition from Stabilization Grants to the new Great Start support payments. In addition, legislation directs state administrators to establish a process for a child care and early education professional wage scale. The legislature allocates $3.9 million in 2024-2025 (and $750,000 per year after that) for R.E.E.T.A.I.N. bonuses that reward early childhood educators who have demonstrated a commitment to the field by continuing their education and professional development.
- Montana passed legislation to expand subsidy eligibility up to 185% of the federal poverty level (FPL), cap family copayments at 9% of family monthly income and pay providers based on enrollment. To support these provisions, the state will allocate $7 million annually from state general funds after the state maximizes any existing federal, state special or other general funds before accessing this appropriation.
- New Hampshire's entire Child Care for NH Working Families Act is included in the final state budget. This includes $45.5 million for the state’s subsidy program (an increase of 54.7% over the FY 22-23 budget) which will expand eligibility for families earning up to 85% SMI (rather than 220-250% FPL), eliminate copayments for families below 100% FPL, and limit copayments to $5/week for families under 138% FPL. The state allocated $15 million to support child care workforce recruitment, retention and scholarships for early childhood professionals. The budget provides $1 million for an Early Childhood Mental Health Consultation pilot program and $50,000 for family child care providers. Under the budget, programs will permanently be paid based on enrollment and reimbursement rates will increase to the 75th percentile or allow for rates to be set through an alternative “true cost of care” mechanism. The budget also establishes a regional fingerprinting support program fund to support child care staff during pending background checks.
- New Jersey allocated $112 million in new state funding for child care. The funding will allow for the continuation of the differential payment for child care providers of $300 a month for full-time care and $150 a month for part-time care, the continuation of copayment waivers and the continuation of payments based on enrollment. The $112 million will also allow for the bolstering of training and technical assistance for school districts that enroll in New Jersey’s QRIS and Grow NJ Kids, and includes a rate increase in early 2024.
- New York provided $446 million in state general funds, an increase of $123 million over the prior year ($323 million) for its subsidy program. The final budget expands eligibility from 300% FPL to 85% SMI. New York’s budget also caps copayments at 1% of household income over FPL, increases absences to 80 per child per year, creates a statewide online application for child care assistance, includes language to streamline the application process for families enrolled in other public benefits programs, and incentivizes supply building by favoring applications for the Low-Income Housing Tax Credit that incorporate child care facilities.
- North Dakota's final budget invested a one-time $65.6 million in new state funding for child care, including $15 million to incentivize providers to care for more infants and toddlers and $22 million to expand the child care aid program for families with income below 75% SMI.
- Rhode Island invested $7 million in state general funds to sustain 40 existing prekindergarten classrooms serving 800 children that would have otherwise closed with the expiration of federal funds. The budget also allocates $1.3 million of state general revenue to prepare for the expansion of RI Pre-K.
- Vermont passed legislation this session that represents a historic investment of $125 million for child care. Act 27 will expand subsidies up to 575% FPL, eliminate copayments for families at or below 175% FPL, provide $20 million in one-time payments to stabilize child care programs, require the review of minimum compensation, create a committee to explore UPK expansion, increase reimbursement rates by 35%, provide family child care homes with an additional rate increase and pay providers based on enrollment. In the first year of implementation, $50 million from the state’s general funds will be used to support the initiative. In future years, it will be funded by a new .44% payroll tax (75% employer, 25% employee), which will raise an estimated $80 million a year.
- Washington appropriated more than $400 million this year into early learning, the largest investment in state history. With passage of the Fair Start for Kids Act in 2021, the capital gains tax will start funding services this fiscal year. This includes $256 million for family child care collective bargaining agreement, $218 million to increase reimbursement rates to the 85th percentile for centers and family child care homes, $3 million to eliminate background check fees, $500,000 for Infant Early Childhood Mental Health Consultation expansion, $4 million for non-standard hour rate enhancement, and $5 million for provider grants (among many other supports).
States Continue Spending Down Federal Relief
- Missouri invested $78.5 million in federal relief funding to increase reimbursement rates from the 21st-25th percentiles to the 58th percentile. The state also invested $82 million to expand its preschool program, of which $56 million is allocated for school districts and charter schools and $26 million for community-based child care programs.
- Ohio's final budget allocated federal relief funding to slightly expand subsidy eligibility from 142% to 145% FPL, as well as allocate $30 million in infrastructure grants for child care in underserved parts of the state.
- Rhode Island authorized the continuation of ARPA funding for the Early Educator Pandemic Retention Bonuses at $750/quarter for all child care providers through state FY 2024 and into state FY 2025. The budget allocates $4 million in new federal funds (CCDBG) to launch a pilot program offering free child care to child care educators in households under 300% FPL.
Other Legislative and Administrative Actions
- Alaska’s Governor Dunleavy (R) announced a Child Care Task Force to develop policy focused on the availability and affordability of quality child care.
- Iowa passed legislation that increases child care provider reimbursement rates to between the 65th percentile and the 80th percentile of the 2020 Market Rate and expands subsidy eligibility from 145% to 160% FPL. However, this legislation also included increased work and/or educational requirements to qualify for child care assistance, mandating an additional four hours for a total of 32 hours a week. Iowa also announced a one-year pilot program to allow child care workers to apply for subsidy, regardless of family income.
- Maryland’s Lead Agency has begun paying providers in monthly increments in advance of serving children and based on enrollment, rather than attendance. Maryland passed legislation that makes permanent the investments made to the state’s subsidy program with relief funding. The enacted bill prohibits the state from increasing copayment levels, reducing reimbursement rates and the income eligibility requirements and implementing a freeze in program enrollment.
- Mississippi administratively removed the child support cooperation requirement for parents and guardians receiving subsidy.
- Oregon approved legislation that requires landlords to allow tenants to operate family child care homes in rental properties.
On the Horizon
Wisconsin has scheduled a special session on September 20, 2023, to address the state’s chronic child care workforce challenges. Among other supports, Governor Evers (D) is proposing (again) to invest a portion of the state’s budget surplus for child care. In January, Governor Evers proposed $340 million to provide a permanent state investment in the state’s stabilization grant program that was created during the pandemic with federal relief funding. His budget proposal also includes $10 million to attract new providers and $22 million to support the “Partner Up!” Program, which supports employer-child care provider partnerships and child care provider staff recruitment and retention. Wisconsin’s legislature rejected Governor Evers’ proposal this spring and in response to the special session announcement, recently introduced bills that would create a loan program for renovations, lower the minimum age child care workers can be unsupervised in a classroom from 18 to 16, and increase group sizes and ratios. There’s little proof that policies that lower age qualifications and increase group sizes and ratios help build supply.
California’s enacted budget is currently being amended, so some provisions are likely to change in September (for example, the provision to pay based on enrollment may be extended from September 2023 to June 2025). North Carolina policymakers are two and half months late on finalizing a budget.
All states will need to liquidate their CARES, CRRSA and ARP Act stabilization grants by September 30, 2023. Some states have already liquidated this funding ahead of September. These substantial investments have been a lifeline for programs nationwide. CCAoA’s data has indicated that the supply of child care nationwide increased on the heels of federal relief investments, further underscoring the need for additional funding for child care in all states and not the potentially harmful loosening of health and safety standards to build supply.
Making Headway, But States Can’t Do This Alone
It’s encouraging to see states prioritize child care and early learning, but it’s not enough to meet the needs of parents and providers. Funding for child care is a partnership between states and the federal government and it’s time for Congress to step up. There’s bipartisan buy-in among states to put funding toward child care and early learning policies, but Congress must acknowledge the reality of the situation—that states cannot make these investments alone to sustain these transformative policies and that is an all-hands-on-deck situation to protect and prioritize investments for child care and early learning.
This blog was written in collaboration with Lindsey Wood, CCAoA intern, who helped track and summarize the 2023 state legislative updates that contributed to the development of this blog.
See something we missed? Please reach out to Diane Girouard, CCAoA State Policy Senior Analyst, at Diane.Girouard@usa.childcareaware.org.