Two-Pager: Reimagining Child Care in America

September 24, 2021

By Dr. Laurie Todd-Smith

Parents are the most important people in the lives of young children. From birth, children rely on mothers and fathers and other care providers to help promote their overall well-being (National Academies of Sciences, Engineering, & Medicine, 2016). Research has continuously affirmed that the relationship between child and parent is significant to children’s overall contentment and development. Healthy relationships with parents or caregivers are especially critical during infancy. The most recent data from 2019 for the United States indicates that there are 15 million parents with children under 6 years of age (Kids Count Data Center, 2019). While some parents are able to stay home and care for their children, millions of American families rely on child care to facilitate work outside the home. For this reason, high-quality, affordable, and accessible child care is important for working parents and children during the most formative period of their development. Child care is also an essential plank for businesses to ensure that they can meet their workforce needs. COVID-19 has significantly impacted how policymakers are using this opportunity to rethink child care in America. With nearly $40 billion in federal aid being allocated for child care (Hardy & Robbins, 2021), states have many decisions to make regarding how best to align and utilize those funds. The focus for funding child care should be on strategies to amplify the crucial role of parents in raising their children during the most critical time of child development. The families hit hardest by the pandemic are the same families that struggled with low-quality and inadequate care for their children before the pandemic. Universal child care, which is currently being proposed, is a big government expansion program that will create administrative structures building the child care sector rather than building the needs of families and children. The American First Policy Institute fundamentally believes that the funding currently flowing into states provides an opportunity to rethink the current child care environment to ensure high-quality care that benefits children and working families. Providing more money and government subsidies is not the answer. The challenge of our time is how better to align the dollars available to benefit those who need it most while not punishing hard work and increased financial opportunity for parents.

A child’s early education begins at birth and is influenced positively or negatively by the quality of their environment, relationships, and experiences (National Academies of Sciences, Engineering, & Medicine, 2015). 

The child care industry in the United States is fragmented and typically has varying governing structures that seek to align services but continue to fund programs instead of families. The child care market includes a diverse set of for-profit and nonprofit businesses, including large child care centers run by national or regional companies; child care provided in the owner’s home, often referred to as family child care or home-based care; care provided in faith-based settings; and individual caregivers. Child care is different from the K-12 system in that there is no federal involvement in overseeing standards. Child care licensing standards and reporting requirements are managed individually by states within multiple agencies, and states have the freedom to change and deregulate as needed.

According to a Child Trends 2019 report, over 3 million child care settings in the United States are serving children under the age of 6. Since 1975, the female labor force participation rate with children under 18 had increased from 47 percent to 72 percent in 2019 before COVID-19 (U.S. Department of Labor, 2019). In fact, 40 percent of women became the breadwinner within their households (U.S. Department of Labor, 2019). As of April 2021, 59.8 percent of U.S. households were dual income—meaning both parents were employed (U.S. Bureau of Labor & Statistics, 2021). Research has provided some evidence into how childcare costs affect the labor force participation rate for working families, especially for women. For example, one study finds that a 10 percent increase in child care costs is associated with a 7.4 percent decrease in workforce participation by married mothers (Mathur & McCloskey 2014). Thus, with child care expenses on the rise (FRED, n.d.) (Kornrich & Furstenberg, 2007), pro-family policies are more crucial than ever before to boosting labor force participation. Unfortunately, COVID-19 disrupted much of the labor force—especially those employed in high-contact industries with less ability to work remotely—which led to a steep decline of women in the workforce, driven in part by child care as one of the many contributing factors (McKinsey & Company & Lean In, 2020). Before the onset of COVID-19 in 2020, more than 62 percent of parents used child care services outside their homes. Since the onset of COVID- 19, one-fourth of all parents—or 6 in 10 who used child care services—experienced disruptions to their child care (The Federal Reserve, 2021). Moreover, despite the robust economic recovery over the past year, roughly 2 million women remain out of the workforce according to the May 2021 jobs report (U.S. Bureau of Labor and Statistics, 2021).

The federal government currently provides significant funding to states to help them manage child care assistance programs, the overall goal of which is to offset child care costs to help low-income parents enter or re-enter the workforce or seek job training and education. The majority of federally-funded child care is provided by the Department of Health and Human Services through the Child Care and Development Fund (CCDF) and the Temporary Assistance for Needy Families (TANF) program. One small portion of the CCDF funds is allocated for child care quality initiatives.

The research clarifies that high-quality child care has significant benefits for low-income children, especially those from single-parent households (Heckman, 2017). Of the 13.6 million children eligible for child care subsidies in 2015, only 15 percent received subsidies (U.S. Department of Health & Human Services, 2019). A 2019 analysis of CCDF found that just 8 percent of potentially-eligible children received subsidies based on federal income eligibility limits and 12 percent of potentially-eligible children received subsidies based on state income eligibility limits (Ullrich, Schmit & Cosse, 2019). As we acknowledge these major gaps in child care funding levels, it is critical that the Biden Administration continues the progress made by the Trump Administration and target those who need funding the most. The Biden Administration has proposed universal childcare, which will create administrative structures that feed the child care industrial complex rather than feeding the needs of families and children. Additionally, the current administration’s approach to the Child Tax Credit (CTC) transforms it from support for working families to a welfare entitlement that paves the way toward universal basic income. Previously, families had to have at least a small amount of earnings to qualify for a CTC refund when they filed their taxes The Biden CTC is a monthly government check that goes to everyone regardless of their work status. Although currently set to expire after 2021, Congress may make this CTC transformation and the accompanying liberal philosophy of separating income from work permanent in the pending reconciliation package (Noah, 2021).

Table 1 provides data regarding federal spending on child care and K-12 education. In Fiscal Year (FY) 2020, federal spending on child care was $8.2 billion, with an additional $3.4 billion from the Coronavirus Aid, Relief, and Economic Security Act (CARES) (U.S. Department of Health and Human Services, 2020). Funding for Head Start—a suite of programs that promote the school readiness of young children from low-income families—to states in FY2020 was $10.7 billion, which marked an increase of $135 million over FY2019. Head Start also received an additional $250 million in supplemental funds to continue its response to COVID-19. In addition, total state funding for public preschool, serving children ages 3 to 4, surpassed $9 billion across 44 states and D.C. in the 2019-2020 school year, yielding an increase of $301 million from the previous school year adjusted for inflation (Friedman-Krauss et al., 2021).

Overall, the U.S. child care system serves a vital economic purpose as a source of support for the workforce. These federal funds have reporting requirements, but states have the authority to develop standards and licensing for child care. (National Center on Early Childhood Quality Assurance, n.d.). States also have the authority to decide who is eligible for child care assistance and how much to be paid to child care providers.

As Table 1 clarifies, the United States spends a substantial amount on early childhood education and child care. The United States also spends more per student on K-12 education than almost any other country in the world (OECD, 2019). Even with these significant investments in education, according to a 2019 Organisation for Economic Cooperation and Development (OECD) report, American students still perform poorly on academic assessments compared to many of their international counterparts. Fifteen-year-old’s in the United States ranked 25th in reading and 35th in math out of 72 countries participating in the OECD’s 2018 Program for International Student Assessment exam, with only 10 percent of U.S. students scoring at top proficiency levels in reading and just 6 percent at top levels in math (National Center for Education Statistics, 2018). A study by the Department of Education found that 19 percent of American adults were reading at the lowest literacy level in 2017 (National Center for Education Statistics, 2019). Relevant for child care policies, this achievement gap precedes a child’s entry into K-12 schools. One study found that by age 4children from higher-income families have a vocabulary of 45 million words, whereas a child from a low-income family knows only 13 million words (Hart & Risley, 2003). Given these early-age deficits, it is clear that much-needed reforms to improve the overall education system must put families first to recognize their importance for healthy child development.

As noted in Figure 1, brain science confirms that the earliest years of a child’s life are critical because that period of development is when the brain has the greatest ability to change in response to positive and negative experiences. Thus, starting at birth, the environment that young children spend the most time in and the adults they are surrounded by have a profound impact on their healthy development and lifelong well-being. Since 90 percent of brain growth occurs within the first 4 years of life, state leaders should consider policies (Zero to that prioritize families and empowers them to make decisions that best suit their needs Three, 2013). New guidance recently released clarifies that each state’s lead agency can decide on the use of child care funds. There is no one-size-fits-all policy approach to investing in child care. States will pursue different options based on the needs, resources, and priorities of the families within their state. It is critical for states to maximize the new federal COVID-19 relief funds better to align existing programs serving children and families.

Early Childhood systems building is an ongoing process to improve the support services available for young children 0-8 years of age and their families. States have worked to build cohesiveness on financing, governance, training for teachers, Head Start, child care, public pre-k, home visiting, and other sectors of early childhood to operate as a whole. States like Arkansas, Georgia, and New Mexico have significantly improved alignment and coordination of services for young children and their families by consolidating state agencies, creating a governing board for early childhood education, and administering federal and state funding for child care and public PreK from within one agency (Smith et al., 2018). One of the most successful ways the early childhood field has seen improvements is through a systems approach to increase alignment, coherence, and continuity of child care across programs and services (Erdei, 2019). Instead of looking at child care as a separate entity, the systems approach seeks to achieve increased access, reduce duplication of effort, and improve effectiveness across government agencies and between public and private organizations. The best way to develop sound new policies in early childhood education is to build on the strategies that have proven successful. With the current fragmented early childhood system nationwide, and nearly 50 billion dollars being dispersed to fix the broken systems, states need to carefully consider the next steps and build on their existing state plans.

The governance structures for early childhood systems vary significantly from state to state. Nationwide, six states have created an entity to oversee early care and education components. Alabama created an executive department of state government to effectively and efficiently oversee programs to support children in the state. The office guides the state’s early childhood priorities by combining the Office of School Readiness, Office of Early Learning and Family Support, the Head Start Collaboration Office, and the Office of Child Development and Professional Support. An executive order from Governor Bentley established the Alabama Children’s Policy Council and helped coordinate across the state. The research on governance does not provide evidence that structuring a new Office of Early Childhood is necessarily more advantageous or better. A governor supporting this effort, with high visibility, has led to strong sustained partnerships with the agency overseeing child care (Connors-Tadros, Jost & Northey, 2020).

States have taken many different approaches to improve early childhood education. Given the complexity of the many different components of early childhood systems, many states have looked at their existing structures to determine alignment among agencies and across programs serving young children. Georgia created Bright from the Start: Department of Early Care and Learning in 2004 and merged the Office of School Readiness, the Department of Human Resources, the Department of Education, and the Georgia Child Care Council. Bright from the Start administers the state’s PreK program, licensing for child care, federal funding, and the quality rating system for child care. It also houses the Head Start collaboration office. The Georgia State Advisory Council merged with the Georgia Children’s Cabinet to help guide policies and lead efforts with coordinated goals (Georgia Department of Early Care and Learning, n.d.). Iowa, via an executive order signed by Governor Reynolds in March 2021, launched a Child Care Task Force to develop a comprehensive strategy to address the child care shortage and barrier to work in Iowa (Future Ready Iowa, 2021).

The Trump Administration’s efforts to spur economic growth in the United States were deeply intertwined with a breadth of policy work to support and enable working families. In the wake of the Tax Cuts and Jobs Act (TCJA) of 2017, millions of Americans came off the sidelines and rejoined the workforce. In tandem, the administration pursued a necessary focus on increasing access to affordable, high-quality child care and took steps toward establishing nationwide paid family leave. President Trump was the first president to include National Paid Family Leave in all of his budgets, and he led the way with the historic TCJA, which put into place the first-ever Paid Family Leave Tax Credit. In his first address to Congress and every State of the Union, he called for a National Paid Family Leave proposal to be sent to his desk, and various proposals were put forward by Republicans. In addition, for the first time ever, a bipartisan, bicameral proposal for Paid Family Leave was advanced in Congress.

The CTC was doubled from $1,000 to $2,000 for the first time while preserving its pro-work incentive structure—affecting 40 million American families under TCJA (2017) (LaJoie, 2020). Furthermore, the previous administration ushered in the largest ever expansion of early child care funding (pre-pandemic) from $2.8 billion to $5.9 billion, eliminating or reducing waitlists for families in need in 17 states. In the tax year 2019, nearly 6 million families benefitted from the child and dependent care tax credit, receiving an average benefit of $551—totaling credits of $3 billion. In that same year, the poverty rate in the United States fell to the lowest levels in recorded history (U.S. Department of the Treasury, 2019). For the first time in U.S. history, the entire federal workforce, the Nation’s largest employer, can receive 12 weeks of paid parental leave, which was signed into law in 2019.

When COVID-19 hit, 21 million American families relied on early child care facilities to care for and educate their young children (Institute of Education Sciences, 2019). The Trump Administration pushed Congress to secure an additional $13.5 billion in funding to ensure child care facilities remained open, especially for frontline or essential workers. The Trump Administration also encouraged Congress to send more than $39 billion in COVID-19 relief to the child care industry to support hardworking American families. The robust and inclusive nature of this bipartisan policy has laid the foundation of support for these policy accomplishments to be targets for expansion, not elimination, in the Biden Administration.

The Biden Administration’s American Family Plan allocates $15 billion in Child Care Development Block Grants to support child care, expands the size of the CTC while removing the earnings eligibility criteria and transforming it from an annual refund to a monthly rebate, creates an additional child care credit for families, and provides a paid leave credit for employers. While these efforts respond to a genuine need, a sound family policy must create an enduring atmosphere of support and prosperity to benefit American families over the long term. Unfortunately, the prescriptions offered by the Biden Administration fall short of this marker. For example, the monthly CTC payment to eligible families allocates $300 per month for children 6 and under and $250 per month for children between ages 6 and 17, with the White House claiming that this will help impoverished families (The White House, 2021). According to American Enterprise Institute, the monthly payment transfers $101 billion of income to U.S. households overall, but only $36 billion is slated for low-income households, making the program expensive and untargeted (Strain, 2021). By severing the link between the CTC and earnings and drastically increasing the deficit, these policies also risk slowing the economic recovery by undermining work incentives. For example, making it easier for families to remain outside the workforce and encouraging them to rely on government CTC checks as income rather than a tax break fuels potential inflation, which has already begun to materialize.

As both sides of the aisle work together to move forward and continue creating a good working family policy, it behooves them to craft solutions that promote economic efficiency and long-lasting benefits for American working families in the years to come.

CONCLUSION

As the country emerges from COVID-19 and begins setting new policies to keep children and teachers safe, it is the perfect time to reimagine early childhood education. States need to examine the current early childhood systems and build upon those successes. All 50 states have early learning standards for infants and toddlers as well as for preschool through third grade. Policymakers have an opportunity to build on the lessons learned over the last year and make long-lasting changes to improve our Nation’s early care and education system Doing so will require a holistic approach. Recognizing that children learn at all times and in all places, policymakers can engage parents in designing policies and strategies that support families’ needs for child care while also ensuring we do not create more government dependency for child care. Stated best by Nobel Prize winner in Economics, Professor James Heckman, “To foster the skills of American children, we have to help America’s families.”

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