Child Care Stabilization Grants: How Did States Spend?

Child care stabilization grants appropriated in the American Rescue Plan (ARP) Act were signed into law in March 2021. The amount available to states totals $24 billion and is allocated with the same formula used to award Child Care and Development Fund (CCDF) discretionary funds. This one-time grant program is designed to stabilize child care operations and support the health and safety of children and staff. Funding can be used for personnel costs, rent and facilities, COVID-19 equipment and supplies, goods and services necessary to maintain or resume services, and mental health support for children and employees.

States submitted grant usage plans as early as July 2021 as part of their 2022-2024 CCDF State Plans. States had less than a year (by April 2022) to develop a plan for how to use these funds and until the end of this month (by September 2022) to obligate, or allocate, funds. Early childhood programs have one more year (by September 2023) to liquidate, or spend, funds. States faced a quick timeline to figure out how to best spend these funds to provide much-needed relief to programs, while being aware of the consequences of the pending fiscal cliff when these funds are no longer available.

PRIORITIZING COMMUNITIES IN NEED

States needed ways to allocate funding to programs located in communities who have been impacted most acutely by the pandemic. The Social Vulnerability Index (SVI), developed by the CDC, uses 15 Census variables to identify census tracts more likely to need support before, during, and after an emergency. A handful of states (such as CT, DC, LA, MA, MS, NC, NM, SC, TN) used the SVI to allocate additional federal funds on top of a base amount that every applicant receives. For example, South Carolina’s Building Blocks stabilization grants incorporated the SVI into their own Equity Index, which combines multiple indicators to determine the final award amount.

Other common indicators used to adjust the award amount include the number of enrolled children receiving subsidies, state quality rating and improvement system (QRIS) ratings, non-traditional hours, infant/toddler care, English Learners, and children with disabilities. States used a combination of these indicators and assigned percentages to each indicator to determine the amount of additional funding. QRIS ratings do not directly relate to community need, limiting their ability to prioritize equitable distribution of funding to programs serving communities with the most need. Furthermore, some of these indicators require providers to self-report, potentially making the application process cumbersome and confusing. To make the process more efficient and clear, Washington developed a list of criteria based on zip code that did not require providers to input any additional information.

LICENSED CAPACITY VS ENROLLMENT AT THE TIME OF APPLICATION

The stabilization grants also allowed states an opportunity to shift towards funding based on child enrollment, rather than actual attendance. Paying by enrollment is a policy idea that has been explored with subsidy reimbursements, but in this case there is an additional level of nuance because enrollment numbers may be lower due to the pandemic. It is important to make the distinction between licensed enrollment capacity (total number of spots available) and enrollment at the time of application. States like Massachusetts and Connecticut determined grant amounts based on a program’s licensed capacity. North Carolina’s Fixed Cost and Families Grants also ask for total licensed capacity, but the number is then grouped into enrollment categories to determine the grant amount. Paying child care providers to maintain supply, during times where demand can be inconsistent, allows programs to remain open and available for families who need care. This is especially important for home-based child care programs who are more sensitive to changes in child care enrollment due to the small scale of their business.

WORKFORCE COMPENSATION

Child care providers are the foundation of the child care sector, so it is no surprise that states designed grants with incentives for workforce compensation, recruitment, and retention programs. Three states awarded more money if grant recipients agreed to use a certain percentage of funding for staff compensation. Florida awarded 10 percent in additional funds if providers agreed to use at least 25 percent of the total grant amount to increase wages and benefits. In Connecticut, programs could “opt in” to receive 25 percent of additional funds to increase staff compensation, but had their funding reduced by 25 percent if they opted out. Providers in North Carolina could also receive additional funding for Compensation Support Grants, to be used to either 1) provide staff bonuses or 2) develop a compensation scale to increase base pay and/or benefits. Providers choosing the second option received higher grant award amounts to cover benefits. The state recently announced that they will prioritize Compensation Support Grants over other grants through the end of the year.

The child care stabilization grants helped ensure that child care remained a viable option for both providers and families during the pandemic, but it is important to remember that the federal investment provided only temporary relief to a sector that was already vulnerable. As states start to spend down their funds, some (like MA and GA) have proactively allotted funding in FY23 budgets to continue supporting the early childhood sector during the pandemic recovery period and others (like KY) are urging their leaders to do the same. Without significant long-term federal investment, child care providers will continue to face challenges in providing and sustaining high-quality early childhood education for children across the country.

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