Parents Look to Policymakers for Affordable Child Care Solutions

Parents Look to Policymakers for Affordable Child Care Solutions

With federal pandemic relief funding running out, states are turning to general funds, bonds, tax credits and other measures to help the child care sector.

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When parents can find accessible, affordable day care for their kids, they are able to be more productive, which is a boon to employers.

States are scrambling to shore up the child care sector as the $39 billion in relief funding Congress appropriated during the pandemic runs out this month.

"Child care truly is a bipartisan issue, and families are looking to policymakers for solutions," Jenna Bannon, associate director of NCSL's Children and Families Program, told a session at the 2024 Legislative Summit.

She says that in a poll by the First Five Years Fund from May, 89% of voters want candidates to have a plan to help parents afford child care. And 68% believe child care is essential or very important to the economy.

Affordable child care, especially for infants, is hard to find, Bannon says. Infant care can cost $10,000 to $14,000 a year depending on the location. That can be more than college tuition at a state school. State legislatures are considering a wide range of options to make child care more affordable and finding creative ways to fund those options, she says.

"This includes general funds, bonds, land, trusts and sin taxes on gaming, marijuana and tobacco. We've also seen taxes and tax credits," Bannon says.

Consultant Rob Grunewald, a former Federal Reserve economist, says it makes strong economic sense for states to support affordable child care. "Responsive interactions with adults help children feel a sense of belonging and value," he says. "But unfortunately, not all children have these types of interactions, perhaps due to the stresses of poverty or to household dysfunction, perhaps mental illness or addiction in the household."

That's where the financial impacts start.

Grunewald said long-term research shows that when children don't have the stimulation they need at this early developmental phase, it's very hard for them to catch up.

And the benefits of getting those healthy interactions are clear.

"What they're able to show is that children perform better in school and as adults they earn more money in the workforce, they pay more in taxes, they're less likely to commit crime," Grunewald says. "We have returns as high as $4, returns as high as $16" per dollar spent.

"When we ask, well, who benefits from these interventions? Certainly, the children and their families benefit, but the majority of benefits accrued to society, to the public, to the taxpayer," he says.

Economic Impact

When parents can find accessible, affordable care, they are able to be more productive, which is a boon to employers, Grunewald says.

He cites 2022 research by ReadyNation that found more than 50% of parents encounter child care problems that required them to miss work or be unproductive; a quarter of parents were recently fired or had to leave a job because of child care problems.

He says ReadyNation, a nonprofit advocate for policies that support children and the economy, estimated businesses lose $23 billion annually in productivity and in the cost of recruiting and training replacement workers.

Because of that impact on businesses, Kentucky Rep. Samara Heavrin enlisted the business community to support her bill that created the Employee Child Care Assistance Partnership Program. The measure established a $15 billion fund the state can use to match business contributions to child care costs for lower-income employees. For example, if the business contributes a third of the cost, the state will pay a third and the employee would pay a third.

The state initially made it temporary, but it's now in statute, Heavrin says.

"I'm really excited to see how that takes off. I think that a lot of employers did not want to put their money into it unless it was going to be permanent," she says.

Heavrin says the state passed a bill to encourage cities and towns to look at how their zoning regulations could be revised to encourage more day care capacity, whether by expanding where the centers can be established or lowering fees.

Despite the need and demand, the child care industry pays workers less and suffers higher turnover than many businesses. Erica Phillips, executive director of the National Association for Family Child Care, applauds states efforts to make it easier to establish a home-based program and to subsidize care. She says states could work to ensure these small businesses have access to capital to subsidize costs and provide affordable benefits to owners and employees.

"Often one of the biggest barriers to running an in-home child care program are local municipalities that will create barriers or restrictions around people's ability to run a child care program from their house," Phillips says.

Stable Funding

In New Mexico, the economy relies heavily on fluctuating oil and gas revenue, and that loomed large as the state considered how to support child care, says Kelly Klundt, the Legislature's principal analyst.

Klundt says it's important to find stable funding "because you can't set up a child care center, expect them to deliver a high-quality workforce and take care of our children and have those high-quality interactions if you're opening them, closing them, increasing the rates, taking the rates down."

The Legislature settled on funding an endowment with $300 million. The state draws on that to subsidize child care to keep it at 5% of a family's income, Klundt says. Families are eligible based on income, but because the state has a low median income, the program is "it's basically universal at this point."

Klundt says the endowment creates stability for the child care industry.

"In 2020, we put $300 million into it, and by 2028 we're estimating that that fund is going to hit $9.8 billion," she says, adding that the state has created similar endowments for other budget areas.

For more on child care funding and policy, see NCSL's Early Childhood Legislative Database and the report "Trends in Federal Policy on Child Care and Early Childhood Education."

Kelley Griffin is the host and producer of NCSL's Across the Aisle podcast.