As Pandemic-Era Childcare Funding Ends, Many Families Could Suffer

When Paige Connell, the head of an operations startup based in Massachusetts, moved during the pandemic, the most arduous task by far was finding a daycare center that would take all three of her children under the age of 6. Her search proved futile, forcing her family to pay for a mix of options, including daycare for two of her children, while hiring an au pair and nanny to help with at-home care for her youngest.

Connell, who is now a mother of four, says that years later, finding adequate childcare remains cumbersome. While her two eldest children are now in public school, she still spends about $5,000 a month for daycare, part-time at home care, and after school programs. “It is our most expensive bill,” she notes. "It far exceeds our mortgage and is our biggest financial burden at the moment.”

Connell’s story is on par with that of parents across the country. Families spend about 27% of their income on childcare, according to a Care.com report. And more than 50% of Americans live in a childcare desert, meaning there is a lack of available childcare within their census tract.

Existing issues with the childcare industry may intensify as centers that were previously supported by a $24 billion pandemic-era federal investment as part of the American Rescue Plan Act will face the end of that funding on September 30.

Experts fear that the loss of additional federal aid could push childcare businesses to charge parents higher rates, making childcare even more unaffordable for parents. And some centers may even be forced to shut down. More than 220,000 childcare providers were supported by federal funding, using the funds towards personnel costs, rent, equipment, and more. But some 70,000 childcare programs could close, causing more than 3 million children to lose their access to care.

The loss of funding also comes at a time of elevated inflation in the U.S.— rates have dropped since last year but are still high—affecting the price of goods and services while also increasing interest costs on bigger investments like houses and cars. 

Parents like Gabrielle Perez, the personnel chair for a policy council at Children’s Aid, a New York City-based center that provides free childcare for families, are worried about the impact. “Not having access to those extra funds will be detrimental to supporting overhead costs with the current budget that's in place because Children's Aid early childhood programs across the board really do operate at a deficit,” Perez tells TIME.

“Families can’t afford to pay their rent, families can’t afford to put food on their table,” Perez adds. “When you lose these programs in the community, you know, it really does put a strain on the families that are being served because then families have to stay home.” 

Childcare costs

Childcare in America is costly for both parents and childcare centers—many of which rely “almost entirely” on parental fees to cover the costs of the services that they provide, according to Childcare Aware CEO Susan Gale Perry, a national nonprofit that helps families access childcare.

That’s because these centers have to abide by regulations that dictate the number of adults that must be present in a classroom with young children, limiting the number of families they can serve. In the state of New Jersey, for instance, there has to be one adult for every six 18-month to 2.5-year-old children present.

And on average, childcare workers also make an hourly wage of about $13.60 and often don’t have health insurance, Perry adds. Coupled with the shortage of workers, it’s currently an unattractive industry for potential employees.

Connell says the daycare center her children attend in Massachusetts has struggled to hire enough staff. “Our assistant director has actually had to work within a classroom for over a year because they can't find a teacher to replace her. Our director has left and a new director has come in. There's been a lot of turnover.”

And centers who are squeezed financially often have to increase their rates. Connell says her daycare center increases its rate by 5% every year. “From my point of view, it impacts women in a real way that is showing in the workforce,” she says. 

Across the country there have been waves of working women choosing to quit their jobs to take care of their children full-time, either because of long wait times for daycare access or childcare costs are just far too high. Connell’s youngest daughter, for example, is expected to get off the waitlist for daycare in April 2024, when she is almost two years old.

Other centers that operate at no-cost for parents, like Children’s Aid, receive other forms of federal and state funding, but agree that the supplemental pandemic aid functioned as an extra cushion of funding to cover overhead costs or fringe benefits. Children's Aid will not end their services, but may have to reduce the number of families they serve. That could mean shutting down a classroom, or forcing parents to find another low-cost daycare center for their child.

“When you lose these programs in the community, you know, it really does put a strain on the families that are being served because then families have to stay home,” Perez says. “The larger issue here is that if there's no way to fund these programs, then the children will be at a loss, families will be at a loss.”

In response to pandemic childcare aid ending, at least 14 states—including Alaska, Illinois, and Massachusetts, among others—have begun to make investments in childcare with state funds. Alabama saw the highest year-over-year increase in state investments, as legislators put forward a $42 million increase in funding for Alabama’s First Class Pre-K program and the Alabama Quality Stars childcare rating and improvement program.

The White House has also recognized the need for greater investments in childcare, writing a letter to House Speaker Kevin McCarthy in August asking Congress to “act quickly” to provide greater funding for programs that reduce childcare costs for families, and increase access to high-quality childcare.

“It's a triple play when we invest in childcare,” Perry says. “Research tells us that high quality childcare is really good for Children's Early Learning and Development and Health. It's also good for working families so they can go to work and take care of their families. And it's good for businesses who count on employees to be at work and be able to concentrate and not miss a lot of work because their childcare isn't reliable.”