Where Is Federal Early Childhood Policy Heading

Where Is Federal Early Childhood Policy Heading?

Congress and the administration have played a more active role in the sector through pandemic-era relief funding and new regulations.

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The child care industry was struggling before the pandemic with high operating costs, low worker wages and insufficient availability of slots, but the health emergency exacerbated those problems and put them under a new spotlight.

Child care isn't cheap-anywhere. In all 50 states and Washington, D.C., the average cost of center-based child care for two kids exceeds average rent payments, with families spending between 8% and 19% of household income on child care.

From Vermont to Kentucky to Michigan, states have taken the lead in creating new and innovative child care and early childhood programs that improve access and affordability for families. But federal funding makes up the lion's share of public support for these programs: One comparison found the federal government spends about $31 billion on child care and early learning, while states spend about $13 billion.

To better understand the federal policy landscape, NCSL has published reports that summarize the patchwork of federal programs supporting early childhood care and education, and provide an in-depth view of federal trends.

In recent years, the federal government has played a more active role in early childhood care and education through pandemic-era relief funding and new regulations for the Child Care and Development Block Grant (CCDBG) and Head Start programs. In Congress, both parties have crafted significant proposals that would alter existing federal programs.

Expiration of Pandemic Relief Funds

The child care industry was struggling before the pandemic with high operating costs, low worker wages and insufficient availability of slots, but the health emergency exacerbated those problems and put them under a new spotlight. Early in the pandemic, many providers closed, temporarily or permanently, due to decreased enrollment and increased operating costs.

In response, Congress appropriated three rounds of child care funding. The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 and the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act of 2021 included a combined $13.5 billion for the CCDBG program. The American Rescue Plan (ARP) Act, also of 2021, appropriated an additional $15 billion for CCDBG and created a $24 billion stabilization grant to support providers during the pandemic.

As with one-time funding for other sectors, there are concerns about potential impacts on child care once the funds expire. Funding from CARES, CRRSA and the ARP stabilization grant expired in September 2023, and the spending deadline for the supplemental appropriations to CCDBG is Sept. 30, 2024.

Policymakers, early childhood advocacy groups and others in the sector have warned that a child care cliff might force providers to close or substantially raise their prices; both outcomes could further decrease the options available to families. States used their federal dollars in a variety of ways, and many states have responded to expiring federal funds by passing their own short- or long-term funding increases to support child care access. As a result, the effects of federal relief funds running out may vary by state.

New Federal Regulations

The Biden administration has released two significant rules related to the two largest early childhood programs, CCDBG and Head Start. Aspects of the rules bear resemblance to proposals in the Build Back Better Act, which included an expanded child care subsidy and a universal preschool program. Congress considered, but did not adopt, the proposals.

The final rule on CCDBG sets a variety of new requirements for states, including capping family copayments at 7% of family income and requiring states to pay providers based on enrollment rather than attendance. The rule also encourages, but does not require, states to take other actions, such as waiving copays for families with income at or below 150% of the federal poverty line and considering the siblings of children eligible for Child Care and Development Fund plans to be presumptively eligible.

By capping family copays, the rule will decrease the cost for families and shift the remaining copay costs onto states. Because the rule does not come with additional federal funding, it will be up to states to incur any costs associated with required or encouraged changes.

The recently released Head Start final rule changes requirements related to workforce supports and mental health services, and increases pay and access to benefits for educators and staff. By 2031, Head Start programs must pay educators a salary comparable with public preschool teachers, or 90% of the salary of kindergarten teachers, and pay all staff a wage that covers basic cost of living.

Concerns arose during the rulemaking process about potential tradeoffs between raising staff wages and the number of slots available. In response, the final rule includes longer compliance deadlines and flexibilities for small programs, and it allows for waivers if annual federal appropriation increases for Head Start are below a certain threshold.

Since Head Start is a federal-to-local program with little state involvement, there is no direct impact on states. However, the changes may have downstream effects, such as creating substantially different pay across different types of early childhood programs. This could incentivize early childhood educators to, for example, flock toward Head Start positions, which may create more vacancies among other types of early childhood providers. The rule goes into effect Oct. 21, though compliance deadlines vary.

Congressional Proposals

Both parties have been thinking about how to update child care and early learning programs. Democrats have generally favored large-scale changes to existing programs or creating new universal programs, while Republicans have tended to favor modest changes to existing programs.

There are some commonalities among Democratic and Republican proposals to change CCDBG. Both Build Back Better and a Republican CCDBG reauthorization bill would have capped family copays and expanded income eligibility, though not to the same degree. These overlaps suggest that there may be some bipartisan support for using CCDBG to increase child care affordability.

There is growing bipartisan interest in using tax credits to make child care more affordable and to incentivize more employers to provide child care options for their employees.

Several bills in Congress would alter child care tax credits. A few of the most prominent bills have bipartisan support, including the Tax Relief for American Families and Workers Act (HR 7024), the Child Care Investment Act (HR 4571) and the Child Care Availability and Affordability Act (S 4874).

With the 2024 election approaching, the federal political environment remains uncertain. But child care and early learning will likely remain key issues for both parties to consider as families struggle with accessibility and affordability.

Emily Katz is a legislative specialist in NCSL's State-Federal Affairs Division.