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What to Know About the Expiration of Federal Emergency Childcare Funding

6 minute read

The emergency childcare funding Congress allocated during the pandemic is set to expire at the end of the month, raising concerns for the millions of families and childcare providers who relied on it over the last two years.

The funding, part of the American Rescue Plan Act that congressional Democrats passed in 2021, included $24 billion in childcare stabilization grants, offering a financial reprieve to providers grappling with the multifaceted challenges presented by the COVID-19 pandemic. These funds were used by childcare providers to improve workers' compensation, cover expenses such as rent, mortgages, and utilities, and purchase personal protective equipment and supplies.

Some 220,000 childcare programs, the majority of which were family home providers, benefited from these grants, according to the Department of Health and Human Services. At the end of 2022, the average grant award stood at $23,300 for family home providers and $140,600 for childcare centers.

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But the funding now faces a dramatic sunset as several pandemic-era benefits are set to expire on Sept. 30, stripping away economic assistance for millions of Americans and presenting a looming crisis for the industry. An estimated 70,000 childcare programs are projected to close as a result of lost funding, causing 3.2 million children to lose care, according to a study by the Century Foundation, a progressive think tank. It could also lead to tuition hikes and layoffs at some childcare centers, per the study. The loss in tax and business revenue could cost states $10.6 billion a year in lost U.S. economic activity, researchers found.

Here’s what you need to know about the expiration of the emergency childcare funding.

When the funding expires

Like many of the pandemic-era safety net benefits, funding for childcare providers is set to end on Sept. 30, 2023—the day which marks the end of fiscal year 2023. 

Why Congress passed the funding

When Congress approved the childcare grants two years ago, it effectively marked the beginning of a government experiment in federally funding childcare providers, as the $24 billion disbursed in pandemic relief is the largest federal investment in childcare in U.S. history. 

Lawmakers said the funding would help stabilize the industry when it dried up during pandemic-era lockdowns, a time when providers were struggling to stay afloat. Over the last two years, the grants have been distributed to childcare providers and childcare centers by states, whereas in the past, federal support for childcare came mainly through block grants that states used to subsidize care for low-income parents.

Now, with the funds set to expire, some Democrats and Republicans in Congress want subsidies for childcare to be extended or made permanent—though their proposals differ drastically on how much to spend, how to finance it, and which legislative vehicle to use.

What to do if you're impacted

When the funds expire, childcare providers will likely need to raise daycare costs for parents or lower staff salaries to make up for the lost grants. Some care programs may even close. 

Economists say the impending rollbacks could hurt lower-income families and disproportionately impact mothers, who have returned to work at record rates since the pandemic and could soon be making tough decisions on how to handle childcare costs, which have risen faster than inflation for five straight months. Research suggests that childcare is the largest financial burden of raising a kid, costing an average of $11,752 per year in the U.S., according to LendingTree. 

Should childcare providers close after the expiration of federal funding, some parents may need to turn to alternative care options in their area, such as childcare co-ops or sharing a nanny with other parents. Parents in certain states may choose to rely on universal preschool programs— offered in Washington, D.C., Florida, Iowa, Oklahoma, Vermont, West Virginia, and Wisconsin—in which kids can enroll into the public education system before the age of five.

What Congress is doing to make childcare more affordable

Childcare disruptions have become a rare issue of bipartisan agreement in Congress. Although no formal plan has been made—and some Republicans are pushing to slash safety-net programs—many lawmakers agree that childcare needs to be more accessible and affordable, with increased pay for workers.

A group of Democratic lawmakers introduced legislation in mid-September that would provide $16 billion in stand-alone funding for childcare over the next five years, effectively extending the pandemic-era funding after it gets cut off. “Ask any parent, any provider or any business in just about any part of this country, and they will tell you: We have a childcare crisis in America,” Sen. Patty Murray, a Democrat from the state of Washington who co-introduced the bill, said in a press conference on Sept. 13. “And that crisis could soon go from bad to worse as essential relief for the sector expires at the end of this month.” 

In the House, Republican Rep. Nancy Mace of South Carolina and Democratic Rep. Ro Khanna of California recently launched the Congressional Bipartisan Affordable Childcare Caucus to address the high cost of childcare. Khanna is working on a bill to subsidize childcare in such a way that most families would pay $10 a day, while providers would make $20 per hour. Mace told CBS News’ Face the Nation in August that rolling back government regulations for childcare providers and workers would be a "good start" to making childcare more affordable. "It's not going to be easy to do some large comprehensive spending package," she said.

The push for congressional action comes after the White House did not include childcare funding in its supplemental funding request in August, which would have been a potential vehicle for renewing the grants. The Biden Administration instead asked for $24.1 billion in assistance for Ukraine and other allies, $16 billion for disaster relief, and $4 billion for border security and migrant aid, though the supplemental funding bill remains tied up in Congress.

But the pressure is mounting on lawmakers—and the White House—to make a move. On Sept. 11, the National Women’s Law Center and 994 national and state organizations sent a letter to congressional leaders urging them to act. “Without these federal funds, we are once again creeping towards another childcare crisis that would carry major economic consequences,” the groups wrote, representing childcare providers, after-school and summer programs, religious programs, and small businesses.

In the meantime, a number of states have taken steps to bolster childcare financing on their own. In Minnesota, Vermont, and New York, state lawmakers injected millions of dollars into early childhood initiatives this year. In Michigan, a new public-private partnership splits the cost of childcare equally between the family, the employer, and the state.

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Write to Nik Popli at nik.popli@time.com