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New Storm Brewing for Childcare Facilities as Federal Subsidy Ends

Daycare facilities are about to take a hit as federal ARPA funds run dry.

The 2021 American Rescue Plan Act (ARPA) counteracted some of COVID-19’s economic devastation by helping families and mothers return to work. One of its components involved sustaining and preserving childcare providers who took a hit during the shutdown. ARPA delivered $24 billion in childcare stabilization grants to buttress licensed care centers. However, that federal money ended in September, and with few states stepping up to replace it, the nation should prepare for consequences. A June report by The Century Foundation predicts almost 30,000 kids will lose access to child support in Mississippi alone as aid runs dry.

“When the ARPA stabilization funds cease, child care will be starved of resources,” authors state. “The child care staffing shortage that preceded and continued through the pandemic will return with a vengeance, putting upward pressure on prices as child care businesses choose between raising wages to attract early educators—or going out of business.”

Every state benefitted from ARPA childcare funding, but six states, including Arkansas, Montana, Utah, Virginia, West Virginia, and Washington, D.C. could potentially lose up to one half of their licensed childcare facilities. The supply of providers could drop by one-third in another 14 states. Nearby Georgia, for example, could see more than 80k kids slip from service. But the numbers stand to be even more extreme in Florida and Texas, with 212,000 children set to lose childcare in Florida and more than 300k at risk of losing care in the Lonestar state.

The organization predicts more than 70,000 child care programs—one-third of those supported by American Rescue Plan stabilization funding—will likely close, and approximately 3.2 million children could lose their child care spots. This could put a $10.6 billion hit on U.S. economic activity per year, and cost families $9 billion a year in lost earnings as working mothers and parents reduce their working hours or quit their jobs altogether to become full-time caretakers. On top of that, child care centers will “likely lose another 232,000 jobs.”

The strong U.S. job market is an unexpected drawback. The Bureau of Labor Statistics reports unemployment numbers coming in at 3.8 percent, and the availability of work will give the childcare industry some very strong competition. Early education is an undervalued industry that traditionally suffers from low pay, and child care workers, overrepresented by Black and Latina women, may take advantage of the market and abandon the sector for higher-pay elsewhere. If enough leave, companies may have to close their doors. The Century Foundation predicts roughly 370 child care centers to close in Mississippi alone. In Texas, that number could almost top 4,000.

Christi Jackson Payton, managing partner at Leaps & Bounds Developmental Academy, in Jackson, received $640k in ARPA money. Payton treated the money as temporary and made no reoccurring investments such as pay increases, but she did provide generous bonuses to staff to coax them to stay. However, the federal money, transferred through the Mississippi Department of Human Services, came with strings.

“You had to exhaust the funds by a certain date,” Payton told BGX. “As the program ended, we went into audit for the expenditure of those funds. We would not have minded that process to be stretched out to benefit us longer term. Bonuses are nice, but we need higher pay to attract quality staff.”

The industry, she warned, is underserved and not sustainable without some form of subsidization. Payton charges $150 a week to keep her doors open. That’s $7,000 for year-round care, in a state with an annual income ranking just above Puerto Rico at $26k, and with nearly 20 percent of its population in poverty.

Payton said her business will likely weather the storm, but other owners expressed anxiety at being at the whim of volatile market forces. Some did not want to speak to BGX on the ARPA money they accepted, fearing an admission would make their company look unstable and discourage new patrons.

Mississippi increased access to childcare subsidies this year, which provides limited relief to some facilities. Gov. Tate Reeves directed MDHS officials to lift an onerous 20-year rule requiring mothers to cooperate with child support enforcement to be eligible for state childcare assistance. His decision came during an election year, when the governor is hounded by persistent unpopularity and haunted by the stain of the state depriving mothers access to federal money while disbursing millions of dollars in TANF funds to politically connected allies.

“Parents can access childcare certificates more than ever than I’ve seen in the past 18 years. The removal of the child support barrier made a huge difference,” said Payton, explaining that many young mothers loathed to report fathers to child service for risk of losing a valuable babysitter and ally. “Also, I had a parent that recently applied. Her child was conceived as a result of a rape. She’s a teen parent. And there was no child support case opened in that circumstance and there will not be one, but she’s a high school senior, and she needs to graduate, and she needs childcare to do that.”

Mississippi saw a consistent rise in the number of families accepting public assistance for child care after the governor’s timely decision, from 24,000 new applicants last October to 31,000 last month. The uptick was high enough to force parents to undergo a new waiting period for assistance.

Payton warned the increase will not save many facilities if market forces continue to work against them, however.


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