Future Directions for Child Care Stabilization: Insights from State and Territory Uses of COVID-19 Relief Funds

This report provides a snapshot of the amount of COVID-19 funding received, how it was used, and trends in parental participation in the labor force, income levels, work disruptions due to child care needs, child care subsidy receipt, child care supply, and wages for child care workers. Researchers analyzed publicly available data and conducted an online survey of CCDF administrators to verify policy information, detail uses of funding, and understand concerns about the end of COVID-19 funding. The survey, with responses from 34 states, the District of Columbia (DC), and three U.S. territories, offered valuable insights into the impact and future needs of child care stabilization efforts.

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Key report findings include:

• The most common use of funds was providing payments to child care providers based on enrollment rather than attendance (77%), reducing or waiving family co-payments or fees (71%), and expanding family income eligibility (71%). Collectively, these efforts helped support child care providers and families, including parents who were essential workers, during the pandemic.
• States and territories reported using stabilization and discretionary funds to enhance mental health supports for children, families, and child care providers. These supports included mental health consultation services and trauma-informed care training.
• States also reported using discretionary funds to increase compensation for the ECE workforce, with 83 percent providing bonuses, wage increases, or benefits.

• Between 2019 and 2022, labor force participation among families remained steady, and the percentage of families in poverty decreased slightly, but child care disruptions declined more slowly. In April 2021, about 7 percent of families experienced child care disruptions, which surged to 30 percent by January 2022 before decreasing to 17 percent by the summer of 2022, indicating that stable child care arrangements remained a challenge.
• Initially, most families supervised their children while working during disruptions (30%), but as this proved unsustainable, other actions like taking paid leave (up 16%) and reducing work hours (up 11%) became more common along with increases in families leaving their jobs or taking unpaid leave.

• From 2019 to 2021, there was an 8 percent decline in the estimated number of children and families receiving financial assistance through the CCDBG. This decline likely reflects initial challenges such as provider closures, staff shortages, and capacity limitations during the pandemic; however, these data do not capture the impact of actions resulting from the American Rescue Plan Act (ARPA) funds, which were not allocated until March 2021.
• Additional tracking of child care assistance data is needed to better understand trends following increases in family eligibility.

• The overall number child care providers decreased by 6 percent between 2019 and 2022 with a greater decline in home-based care options.
• Despite a 16 percent wage increase for child care workers during the pandemic, their overall workforce declined by 18 percent, with child care salaries (averaging $29,570) still significantly lower than kindergarten teachers’ salaries, which average $65,120 annually. States invested relief funds in financial support and flexible payment policies to stabilize child care programs, yet workforce challenges persisted, affecting the availability of care.

• The top concerns among CCDF administrators now that stabilization grants have ended are maintaining ECE staff compensation (78%), fears of losing staff (76%), and increased child care costs for families (68%).
• Administrators also expressed concerns about the end of discretionary funds in September 2024 with the most common concern being the potential for waiting lists in child care subsidy programs (40%).
• Seventy percent of administrators indicated that state funds were used to supplement COVID-19 relief primarily to increase provider reimbursement rates and support other stabilization policies.

These findings provide an initial snapshot of child care stabilization trends; however, there are limitations due to the timeframe of available data, which may not fully align with the distribution of all funding. Disaggregation of the data is also needed to examine variations among different groups. These gaps need to be addressed through additional research. The report’s action steps for further research offer recommendations to reflect on and apply lessons learned from policy actions taken during the pandemic. Assessing state and territory-specific contexts before and after the pandemic is critical to building on each child care system’s strengths and areas for improvement, ultimately achieving long-term stabilization and equitable child care access for families.