Child care providers face funding cliff as ARPA dollars fall away

This article is part of Early Education Matters, a series about how Michigan parents, childcare providers, and early childhood educators are working together to implement Pre-K for All. It is made possible with funding from the W.K. Kellogg Foundation.
In the middle of the pandemic, when many early childhood care facilities were shutting down, Senta Johnson-Smith did just the opposite: She fulfilled her dream by opening Sent Loves the Kids daycare in the Detroit area.

“It was so amazing to me to get everything done, the requirements and the inspections, and how everything just flowed,” says Johnson-Smith, who has been in early child care for more than 25 years.

Her goal has been to provide a place where children from birth to age 12 can prepare to take on the next level in schooling. Johnson-Smith provides a focused curriculum for all age levels. She often changes out toys and activities, hosts special days, and sponsors field trips.

But the field trips are coming to an end. Since all of the children at Sent Loves for Kids receive subsidized funding from Michigan Department of Health and Human Services, the facility also was receiving extra early childhood funding from the American Rescue Plan Act (ARPA), funding which ended on September 30.

“It is going to impact sponsoring the field trips or just the extras like that,” Johnson-Smith said. “We might do pizza day and different stuff, but I'm trying to keep it as small as possible. I have to budget to afford to pay the teachers … because I have to have a certain amount of teachers. It'd be either that or I have to cut my [number of] kids down. A lot of these parents are reliant on daycare because they have no family members to take care of them during the hours they need or when they can pull some extra hours to get that extra money.”

For decades, early childhood education has been underfunded leaving challenges in pay for teachers balanced against cost to parents. Then along came the COVID pandemic, which underscored the importance of child care for the economy while revealing the system’s shortcomings. To help Americans and the economy, the federal government stepped in with the $1.9 trillion ARPA funds, earmarking $24 billion to the stabilization of child care, $15 billion to supplement the existing child care program for low-income families, and $1 billion for Head Start.
Jeff Miles, vice president of community impact, United Way for Southeastern Michigan.
Michigan received about $1.4 billion in childcare funding from ARPA and the Coronavirus Response and Relief Supplemental Appropriations Act. Rachel Richards, fiscal policy director at the Michigan League for Public Policy, notes that these funds were used to boost the state’s childcare assistance program. 

The result was a stabilizing effect on the early childhood sector, which needs to continue, says Jeff Miles, vice president of community impact for the United Way for Southeastern Michigan.

Now, childcare providers across the state face a funding cliff that threatens their sustainability. 

“The only way that we're going to continue to avoid these kinds of cliffs is if we really take a look and make significant investments, long-term investments that allow us to raise wages for providers and for teachers and to keep prices low for families,” Miles says.

Offsetting the funding loss

Michigan subsidizes early child care through the Child Care and Community Block Grant (CCCBG), a 30-year-old program that allows states to help low-income, working families afford child care while supporting children’s learning and development from birth through age 12. Some additional state funding, CCCBG and state, is also used for children zero to five, Richards says.
Rachel Richards, fiscal policy director, Michigan League for Public Policy.
The state used the ARPA funding in a number of different ways such as child care stabilization to help providers open, remain open, and to operate safely; supplemental pay; assistance in high-need areas such as infant and toddler; and for providers who could offer non-traditional hours such as nights and weekends. 

“While we have sufficient funding in order to maintain our entrance eligibility rate at 200% of the federal poverty level (which is about $60,000 for a family of four), we didn't have the ability to do that as well as maintain the higher reimbursement rates that we have been paying to providers to provide care,” Richards says.

The result will be a decline in reimbursements to providers. Richards notes that childcare facilities are reimbursed based on the type of facility, a child’s age, and how many hours the child attends the program. For example, a child care center that has the state's enhanced quality rating (formerly the three-star rating) that is caring for an infant or toddler will drop from about $9.30 an hour to $7.30 an hour. That same facility will drop from about $6.85 per hour to $5.35 for school-aged children who are five or older.

Miles estimates it may take a couple of months for Michigan to feel the impact of the lost ARPA funds as providers are just now billing the state for the newest round in subsidy funding.

"Over the last few years, we've really started to understand and see the kind of impact that child care has on not just the economics of a family but also the long-term educational outcomes for kids," Richards says.

The lost reimbursements could force childcare providers to make some tough choices — raise rates, make cuts, or close — all of which could leave families looking for alternatives. Independent think tank The Century Foundation estimates that 3.2 million children nationwide will lose their childcare spots with an estimated 70,000 childcare programs — about one-third of those supported by ARPA stabilization funding — likely to close. 

In Michigan, The Century Foundation estimates about 1,261 child care programs will close, impacting 56,648 children. 

To help offset some of the ARPA funding loss, Johnson-Smith has added Saturday hours. Her facility is now open 24 hours, seven days a week. Despite the effort to raise funding, she still was forced to reduce wages due to the loss of ARPA funding, resulting in two of her teachers leaving.

According to the Michigan Department of Education (MDE), the state has made some steps to help, including increasing childcare subsidies, which are now 40% higher than pre-pandemic levels. But in a September 13 letter to parents and providers, the MDE admits that “even with this increase, child care reimbursement rates may not fully support the true cost of quality, including offering competitive wages to attract and retain child care workers.”

No movement on the state level has been made to help cover the lost APRA funding. On the federal level, several members of Congress have introduced the Child Care Stabilization Act to extend the funding. However, with Congress gridlocked over several other issues including the federal budget, the Child Care Stabilization Act is not expected to be acted on this year.

“COVID shined the light on a lot of things,” Miles says. “I think it really shined a light on the importance of early childhood education, not just for the development of students, but also the impact this can have on families and the ability for parents to return to work, stay at work, and work schedules that really work for their family.”

“Having child care is a huge benefit because it allows me to look for employment and take care of different responsibilities." - Shamirror Moncrief
Organizations help connect parents to child care

The state-funded preschool program Great Start Readiness Program (GSRP) and the federally funded Early Head Start or Head Start programs serve about 66% of eligible children statewide. Miles says that from United Way’s research and conversations with parents and caregivers of young children, a lack of awareness of these programs is a pervasive issue. He adds that parents and caregivers are often hampered by out-of-date information, a complicated web of eligibility requirements, and confusing application processes. 

To help simplify the process, the United Way for Southeastern Michigan developed Connect4CareKids. Through the program, which was started before the pandemic, parents answer a series of about 10 to 12 questions to identify which programs their children are eligible for and to locate  providers in their geographic area. In turn, providers agree to respond within five days to finish the enrollment process by letting parents know if there is a waitlist and other available options.   

With three children, one of whom lives with autism, Wayne County parent Shamirror Moncrief spent several months looking for child care to accommodate all three of her children. According to a 2016 Early Childhood Program Participation Survey (ECPP), a larger number of parents with children with special needs experience difficulty in finding child care than parents with children who have no special needs. 

“When you have multiple children, it is really difficult to have them in separate locations,” Moncrief says, noting that she was able to find a place through Connect4CareKids for her two youngest with her school-age child attending an afterschool program. “Having child care is a huge benefit because it allows me to look for employment and take care of different responsibilities such as doctor's appointments, scheduling, getting paperwork done, things of that nature.”

Miles says since the early childhood programs are not set up to track students once they are in, it has been difficult to assess what impact the Connect4CareKids is having. United Way for Southeastern Michigan is working to be able to track as families move through the process along with utilizing data to determine if areas are in need of expanded programming because of need. He adds that the goal is to make the Connect4CareKids program available statewide. 

Shamirror Moncrief reads to her daughter at bedtime.
PreK for All and beyond

A key component to Governor Gretchen Whitmer’s PreK for All has been to help support families by providing free preschool to all four-year-olds by 2027. Over the past several months, the Policy Equity Group has hosted in-person and virtual sessions to gather input from parents, providers, and educators. One comment made at most of the meetings is the need to not only focus on four-year-olds but also consider zero-to-five early child care in its entirety.

“We absolutely have to look beyond just four-year-olds and start to think about those three-year-olds and two-year-olds,” Miles says, adding that the expansion of GSRP has to make sense for families. “We have to include Friday care, we have to make sure hours are appropriate because, again, this is a family system. We really need to make sure that it's being responsive to the needs of the whole family.”

Richards agrees that the state needs to look at the entire zero-to-five system and fully fund the actual true cost of care for children.

“I think that there is a growing call for affordable, accessible child care,” she concludes. “We've seen some significant support within the business community recognizing that people can't get to work, and people can't go back to work if they don't have care for their kids.”

Joanne Bailey-Boorsma has 30-plus years of writing experience having served as a reporter and editor for several West Michigan publications, covering a variety of topics from local news to arts and entertainment. 

Photos by Doug Coombe.
Preschool photo by Stephen Smith

Early Education Matters is a series about how Michigan parents, childcare providers, and early childhood educators are working together to implement Pre-K for All. It is made possible with funding from the W.K. Kellogg Foundation.
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