Miguel Sanz
Closing The Gap

Democrats earmark $7 billion for child care in newest relief package—but it won't be enough to stabilize the system for long

Nearly half of day cares, preschools and child-care centers around the country have been forced to temporarily close during the coronavirus pandemic. Another 17% are only open to children of essential workers, according to a recent survey by the National Association for the Education of Young Children. 

And even when they're allowed to reopen, the Centers for Disease Control and Prevention have issued a laundry list of guidelines that encourage providers to utilize smaller class sizes, equip staff with appropriate protective gear, increase sanitation routines, provide training for teachers and facility employees and attempt to put social distancing procedures into place. 

"There is expense associated with all of that," says Lynette Fraga, executive director of Child Care Aware of America. "Equipment costs money, sanitizing equipment costs money," she says, adding that the lower ratio of children to teachers and smaller group sizes have "flipped the business model upside down on its head." 

As a result, many child-care providers are desperately seeking federal assistance to reopen — to the tune of a $50 billion bailout. If they don't receive adequate support, nearly 4.5 million child-care slots could be lost, according to the Center for American Progress, leaving parents scrambling to find alternatives in an industry that already suffers from scarcity.

Advocates say new relief package doesn't deliver enough

Yet in the latest coronavirus relief package, which is being referred to as the HEROES Act, lawmakers only allocated $7 billion for child-care support through the Child Care and Development Block Grant (CCDBG). This fund is typically used to funnel federal funding into child-care subsidies for low-income families with children under age 13. However, under the new legislation, child-care providers can apply for emergency assistance for expenses such as payroll and additional sanitization supplies and personal protection equipment for staff. 

The additional money builds on the $3.5 billion in emergency funding Congress allocated to the CCDBG in the first coronavirus stimulus package passed in late March. That funding was not only earmarked to help support providers that may be struggling with low enrollment or closures related to the coronavirus, the legislation stipulated that it could be used to help emergency responders and other essential workers pay for child care. 

In theory, child-care providers can also apply for Paycheck Protection Program loan (and some have), but experts say the program is not a good fit for the vast majority of facilities. "The loans aren't designed to meet the needs and realities of child-care providers and simply cannot be the solution for the field," says the Center for Law and Social Policy. Many home-based providers, for example, don't have additional employees to keep on the payroll. Other providers operate multiple locations as a network, meaning that have too many employees to qualify.

The current level of federal support just simply isn't enough, advocates say. The National Women's Law Center argues the extra $7 billion, if passed, only stabilizes the struggling child-care industry for three weeks. "Without sufficient relief, there will not be a child-care system to return to as we look to rebound from this crisis," says Catherine White, director of child care and early learning for the National Women's Law Center. "Parents, especially women, will not have the care they need to go back to work or school, employers will be unable to restart without workers, and our economic recovery will be jeopardized."

Without sufficient relief, there will not be a child-care system to return to as we look to rebound from this crisis.
Catherine White
director of child care and early learning for NWLC

"People are very grateful for the $3.5 billion that passed in CARES Act and that there is money in this [new] package — there's just a lot of panic that if this is it, then we could be in dire straits before there's another opportunity," says Katie Hamm, CAP's vice president of early childhood policy. 

"Ten billion dollars buys you some time, but it doesn't stabilize things," Hamm says. 

How advocates arrived at $50 billion price tag

The child-care industry will need $9.6 billion a month in federal assistance to prevent providers from being forced to permanently shut down, according to an analysis by the Center for Law and Social Policy and the National Women's Law Center.

That means $50 billion in federal assistance will likely sustain the sector for a little more than five months, says Aaron Sojourner, labor economist at University of Minnesota's Carlson School of Management and researcher on the analysis. 

"Child-care providers survive on thin margins. And the coronavirus economic crisis squeezes them — between falling demand and increased difficulty delivering services — threatening to push many out of existence," says Sojourner, who served as a senior economist for labor at the White House Council of Economic Advisers under Presidents Obama and Trump.

Many advocates also believe that preserving access to child care is essential to getting Americans back to work and restarting the economy. "Child care is the invisible support that's been underpinning our economy and job system for decades," says White.

Some lawmakers are on-board as well. Senators Warren and Tina Smith (D-Minn.) proposed a $50 billion plan in mid-April, saying that the $3.5 billion already allotted wasn't enough to stabilize an industry that brings in roughly $50 billion in revenue.

The child-care industry is far from the only sector seeking (and receiving) federal support. The so-called CARES Act relief package passed in late March set aside $200 billion in assistance for select industries, including the airlines, which received a $25 billion bailout.

Now is the time [for large investment] if we want to have a child-care industry that is robust, that is able to survive this pandemic. We are worried about the very survival of this sector.
Katherine Clark
Congresswoman (D-Mass)

Meanwhile Congresswoman Katherine Clark (D-Mass.) released a separate proposal last week that calls for a $100 billion investment to aid the child-care industry: $50 billion in the form of short-term stabilization funding and an additional $50 billion in long-term recovery support. "Now is the time [for large investment] if we want to have a child-care industry that is robust, that is able to survive this pandemic. We are worried about the very survival of this sector," Clark tells CNBC Make It. 

But despite their efforts, the HEROES Act doesn't reflect these attempts to get major funding for child care included in a federal relief package. "I think the disconnect is with the Republicans and the administration in Washington," Clark says. "We have to continue to push that this is not some accessory program. This is one of the fundamental foundations of our economy and that we cannot let it languish." 

Better than nothing?

At the end of the day, some money is always better than no money, Hamm says. And for some providers, the proposed $7 billion in additional funding may help get them through the worst of the pandemic. But it likely will not prevent many providers from closing permanently. 

"Child care is a system that is really not a system — it's a bunch of things kind of cobbled together that are vulnerable to a big gust of wind," says Pyper Davis, executive director of Educare DC. And many times, child-care providers are so much more than a place to drop children off for a few hours. 

"Parents, perhaps now more than ever, understand and value the importance of quality and safety in child care," Davis says. "They want to make sure their children are in an environment where they're going to be healthy and safe, and also where they are learning and having experiences that support their healthy development. No one sees child care just as a place where you take your kids when you go to work."

Educare DC, which is part of a national network of 24 schools serving infants, toddlers and preschool-aged children, is stepping outside the classroom these days to help its children and families. A Head Start and Early Head Start provider, Educare DC focuses on providing early childhood learning for low-income families. The organization already receives federal funding, so while their facilities had to close in mid-March, Educare was able to continue to pay staff and teachers to provide area families with food, diapers, learning activities and mental health resources during the shutdown. 

"Our teachers are reaching out to families several times a week. We have been making sure the families have the food and diapers that they need. We provided activity packets and that kind of thing," Davis says.

What happens next for an industry on the edge 

While some centers like Educare are secure for now, other providers are not. "There are child-care providers who are saying that they've been in business 40 or 50 years and now they're going to potentially have to close," Hamm says, adding that other centers are reporting they haven't been paid in seven weeks because they're waiting for the children of essential workers to get approved for child-care assistance. Others are staying open to provide care for children of emergency workers, but are doing so at a loss. 

Meanwhile, there are child-care center directors like Chad Dunkley who are not taking salaries right now to keep their organizations afloat. Dunkley serves as CEO for Minnesota-based New Horizons Academy, which operates 88 locations in Colorado, Iowa, Idaho and Minnesota. In addition to not taking a paycheck, he's had to lay off staff, furlough teachers and skip paying rent for April in order to conserve cash. 

"The pain is real," Dunkley says. "We're burning through cash — our expenses are definitely larger, and they're going to grow larger when we have to start paying rent again." 

There are millions of people who are making things work during the pandemic, from nurses to postal workers to grocery store and restaurant employees. "None of them are doing it for free," Hamm says. But by skipping paychecks, taking pay cuts and providers even operating at a loss, it feels like "we're asking child-care providers to do this for free," Hamm says. 

"The pain is real. We're burning through cash — our expenses are definitely larger. 
Chad Dunkley
CEO for Minnesota-based New Horizons Academy

In addition to the $7 billion being far less than what advocates say is needed, Hamm worries that the money allotted in this latest relief package may send the wrong message to states and local leaders. "I think it sends a signal to states that more [funding] might not be coming down the pike or that we might not see a real bailout," Hamm says. 

That may put local lawmakers in a tough spot as they try to make that money last as long as possible. "If they think that that's all they're going to have to get through the pandemic and the aftermath, they're going to be a lot less likely to spend that money right away."

"It's going to reach a breaking point," Hamm says, where providers realize that they can't continue on and are forced to close. "And I think people are going to be surprised by that. The child-care community has been begging for some support, and it's just not happening.

Yet Clark remains determined to get additional assistance flowing to child-care providers. "We will keep our push on for the funding that we think is necessary," Clark says, adding that while the HEROES Act will provide some support, it's "only just the beginning of the investment we're going to need to ensure that our child-care sector comes through this pandemic and is ready to serve families again."

"We're going to keep pushing for this funding, whether it's in another relief package, or if we can get the Senate to add even additional funding — and we're going to start looking towards recovery bills and infrastructure bills, all the places where we can put the investments in to our American families and our children because we know that there is going to be no recovery without a strong child-care system," Clark says.

Check out: The best credit cards of 2020 could earn you over $1,000 in 5 years

Don't miss more in this series: 

Kids can't be an 'afterthought': Some states are reopening without lifting child-care restrictions

Many child-care facilities aren't accepting kids, but for some parents, the bills keep coming

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Why child care is so expensive in America
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