Bolstering State and Local Care Infrastructure with Federal Recovery Funding

The pandemic revealed many weaknesses in the country's caregiving infrastructure, exposing both how essential caregiving work is, and how hard it can be to find and pay for. Billions of dollars in State and Local Fiscal Recovery Funds (SLFRF) from the American Rescue Plan Act (ARPA) remain available for state and local leaders to bolster their care agendas close to home. Many states have already put these funds to work closing the care gap. There is time for others to invest in their care infrastructures, but they must obligate the funds by the end of 2024.

New America's analysis of recovery fund reporting data finds that states and localities are directing at least $3 billion from ARPA’s State and Local Fiscal Recovery Fund to seed more than 700 innovative and ambitious care investments in five areas that lower costs for families and invest in America and its people: child care; expanded preschool and early learning opportunities; home and community-based care; child tax credit enhancements; and paid family and medical leave.

There’s still time to redirect non-obligated fiscal recovery funds and influence use of dollars that states and localities obligated without concrete plans. State and local leaders have the flexibility to adjust spending priorities to capitalize on fiscal recovery funds to respond to the care crisis that threatens our economic recovery and the wellbeing of families and communities. These funds also present opportunities to bridge the gap as pandemic-related programs and care-specific ARPA funding streams dry up, enabling continued progress on implementing a more robust, comprehensive care infrastructure. This brief offers examples of projects and resources to guide communities that are interested in bolstering their care infrastructure through these remaining recovery funds.

As the country attempts to move on from the pandemic, its effects are still visible, with lingering implications for American families and the broader economy. The child care crisis continues to constrain working families, who represent a sizable portion of the workforce. Two-in-five full-time working parents have children under age six, and women who are parents of young children are far less likely to be in the labor force than their male counterparts. A recent ReadyNation report estimates that lost earnings, productivity, and revenue due to inadequate child care costs families, businesses, and taxpayers a whopping $122 billion per year, a doubling of the pre-pandemic figure. In low- to moderate-income communities, which were disproportionately impacted by the pandemic, a lack of child care remains the primary challenge in finding and maintaining employment.

But America’s care crisis extends beyond child care. The dearth of home health care workers amid growing demand for their services leaves limited options for aging and disabled people to safely live at home. Many family members must choose between participating actively in the workforce and providing care for adult loved ones who depend on it. In 2021, about 38 million family caregivers provided an average of 18 hours of care per week totaling 36 billion hours and $600 billion in unpaid care work. These are not characteristics of a society with a sufficiently stable and functioning care infrastructure, and they are signs that we are leaving precious workforce resources on the table at a time of low unemployment.

Caregiving is critical infrastructure that makes the rest of our economy work. It supports workforce supply and wellbeing, promotes broad economic growth, and increases the future economic productivity of children who benefit from these policies. Successful economic relief efforts must include robust family care policies and care workforce support. This includes efforts to increase the availability and variety of quality care options, improve compensation for the existing salaried and hourly care workforce, recognize the fiscal value of currently unpaid family caregivers, and more.

The need for investment is even higher in communities that were disproportionately affected by the pandemic, which exacerbated long-standing inequities and challenges attributable to underinvestment in care infrastructure. For all Americans to reap the benefits of federal pandemic recovery investments, the resources must get to people and communities that need them the most: those that are most deeply impacted by the pandemic-induced care challenges and the related economic consequences.

ARPA made an unprecedented federal investment in America’s care infrastructure by putting more than $155.3 billion into the U.S. care economy, including at least $3 billion from State and Local Fiscal Recovery Funds. The overwhelming majority of these funds (at least $152.3 billion) were explicitly for: child care relief funding, increased funding for Medicaid home and community-based services (HCBS), and the refundable advanced Child Tax Credit (CTC), to name a few. These investments provided an important but temporary scaffolding for America’s faltering care network, and remain important components of our economic recovery from the pandemic. However, the clock is running down. While states have until March 2025 to spend down the temporarily enhanced HCBS, many opportunities have expired, and the period for obligating Child Care Stabilization grants closed at the end of FY 2022. Supplementary discretionary child care dollars can still be obligated until the end of FY 2023, which is rapidly approaching. Meanwhile, the care networks currently being supported with those expiring funds face alarming cliffs: the Bipartisan Policy Center estimates that the child care sector alone is set to lose $48 billion in funding. State and Local Fiscal Recovery Funds continue to provide a pathway to temporarily shore up the care economy and smooth the impending cliff of expiring ARPA care funding. The program delivers $350 billion to state, local, and tribal governments for pandemic recovery and response, and may be obligated until the end of 2024.

President Biden's 2024 budget proposes sustained public investments in America's care infrastructure that will lower costs for families and invest in America and its people. Five key areas identified for investment are child care; expanded preschool and early learning opportunities; home and community-based care; child tax credit enhancements; and paid family and medical leave. Underscoring the urgency, a recent Presidential Executive Order directs federal agencies to take immediate action to make care more affordable for American families, support family caregivers, boost compensation and improve job quality for care workers, and expand care options. These actions reflect the Administration’s commitment to care, but do not authorize any additional spending, which is a duty reserved for Congress. While states await Congressional action on the 2024 budget, federally-funded avenues for investment in care through ARPA remain available. States and localities have the rare opportunity to implement care infrastructure priorities using federal funds, which temporarily alleviate usual budget constraints. Our analysis of state and local recovery project spending signals strong demand for state and local investment in care when funding mechanisms are available.

State and local recovery funds are already supporting hundreds of care investments that lower costs for families and invest in America and its workforce. Our analysis of spending data from the Department of Treasury and the National Conference of State Legislatures identified more than 700 projects in five core areas: child care; expanded preschool and early learning opportunities; home and community-based care; child tax credit enhancements and other tax relief for families; and paid family and medical leave. The average project budget is $4.3 million, but half of them are quite modest at $436,000 or less.

Care Projects Are Funded Through a Variety of Treasury Expenditure Categories

The Treasury Department requires states and localities to designate an eligible expenditure category for each funded project, primarily for reporting and oversight purposes. These designations are also used to track the distribution of projects within and across expenditure categories. Because care related projects may be categorized in different ways, our search relied on a combination of expenditure categories and keywords. A complete summary of our methodology is below.

Most care projects are categorized under expenditure category 2-Negative Economic Impacts, specifically 2.11 (Healthy Childhood Environments: Childcare), 2.14 (Healthy Childhood Environments: Early Learning), 2.34 (Assistance to Impacted Nonprofits), and 2.37 (Economic Impacts-Other). Care spending in these categories most often supports child care and early learning programs and projects. A number of care projects are categorized as 1-Public Health and 6-Revenue Replacement, which tend to support employee paid sick leave, COVID mitigation support for caregiving businesses, home and community based care services, financial relief for continued operation of caregiving organizations and businesses, and general assistance with the provision of government-funded caregiving services.

Overall, we see many promising examples for further study and potential replication, some of which we highlight in the table below, sourced directly from Treasury reporting data.

Examples of Care Projects Funded with SLFRF

Airtable created from U.S. Department of the Treasury quarterly reporting data, accessed March 2023. https://home.treasury.gov/system/files/136/January-2023-Quarterly-Reporting-Data-through-December-31-2022.xlsx

Two-Thirds of SLFRF Care Infrastructure Projects Focus on Child Care

There is widespread agreement that the cost of childcare is unsustainable for American families, and many recent fiscal recovery projects aim to reduce that burden. Some states introduced sweeping child care agendas, like New Jersey’s Cross Agency Approach to Child Care Industry Revitalization, and a few larger cities like Austin, Boston, Milwaukee, and Phoenix are also embracing comprehensive approaches. We find that state and local fiscal recovery dollars are funding at least 452 child care projects, representing two-thirds of all SLFRF care infrastructure projects and $1.7 billion, or 56 percent of all SLFRF dollars currently allocated to care investments. The average project budget is $3.7 million, though allocations range from roughly $1,000 to $100 million. Because of the substantial fiscal recovery fund spending on child care and this category’s vulnerability to expiring ARPA support, we illustrate specific areas of use for this flexible federal funding: lowering costs for families, growing and supporting child care workforce, building child care capacity, and funding facility development.

Lowering Costs of Child Care for Families

Many fiscal recovery fund care investments lower costs for working families by expanding income eligibility for child care assistance programs, some to 200 percent or 300 percent of the Federal Poverty Guidelines. Other projects increase subsidies and scholarships for low-income households, or provide low- or no-cost services more broadly. Several cities and counties expanded access to affordable summer care and before and after-school care.

• Nevada provided funding to cover 100 percent of child care copays for eligible low and moderate income families.
• Connecticut budgeted $3.5 million for parent fees at state funded child care and school readiness programs during the summer months.
• Fort Bend County, Texas used $1.85 million to provide child care assistance for low income and unemployed families seeking work.
• Phoenix, Arizona used $5 million to provide child care vouchers for Sky Harbor Airport employees.

Growing and Supporting the Child Care Workforce

The pandemic further destabilized an already faltering child care industry. States and localities are investing fiscal recovery funds to strengthen and rebuild the post-pandemic child care workforce. Increasing provider compensation is critical, but many states and localities are wary of increasing pay without a more permanent funding source, and instead opt to provide one-time bonuses to help attract or retain workers in the industry. Other projects supporting providers and the care workforce include training programs or technical assistance.

• Kentucky allocated $24 million to temporarily increase provider reimbursement rates.
• Rhode Island is providing retention bonuses for child care providers of up to $3,000 per year.
• Deschutes County, Oregon is using funds to train 30 new child care educators within two years.
• Evanston, Illinois created a premium pay program for both center- and home-based childcare providers to support worker retention.

Building Capacity Within the Child Care Sector

Child care capacity shrunk considerably during the pandemic. Fiscal recovery fund care investments aim to directly expand care capacity and access, thereby easing the supply side of the equation for families struggling to find child care. States and localities are capitalizing on critical resources that already exist within their communities through projects designed to strengthen friends and family network providers and home-based child care. Others dedicate fiscal recovery funds to increasing the number of slots available to serve children and expanding service hours to include evening or weekend care.

• North Carolina is providing $20 million in funds for startup and capital grants to Pre-K classrooms and childcare centers.
• Idaho is using funds to encourage businesses to create and develop on-site or near-site child care centers, or to partner with local and regional child care services to increase access.
• Lee County, Florida is using funds to recruit child care providers into a capacity-building and learning initiative focused on creating or expanding services.
• Los Angeles County, California is expanding the Child Care Provider Grant program and establishing a training institute to provide entrepreneurial training for individuals launching child care businesses, including startup grant funding.

Investing in Child Care Facilities

Fiscal recovery funds are supporting significant investments in improving, expanding, or constructing new child care and early learning facilities. Earlier rounds of projects upgraded facilities and made improvements as part of a COVID mitigation plan. But, in later rounds of allocations, state and local governments moved towards renovating for expansion, or construction of new facilities.

• New Jersey is investing $54.5 million into a Child Care Facilities Improvement Pilot Program.
• Oregon is building a 4,200 square foot early learning center in an affordable housing community.
• San Antonio, Texas will use $7 million to design and construct a facility in a current child care desert that will provide care to 250 infants, toddlers, and preschool children.
• Virginia Beach, Virginia budgeted funds to build a facility for a pilot child care program for city employees.
• A community college in Monroe County, Indiana will use funds to remodel their on-campus child care center and play area.

Other Care Sectors Get Significant Boost from Recovery Funds

Though child care investments represent a significant share of SLFRF care projects, these recovery resources are also strengthening other care sectors. We identified 254 projects across the remaining four areas, totaling $1.3 billion dollars.

Expanding Preschool and Early Learning Opportunities

Projects to expand preschool and early learning opportunities comprise the second largest care spending category, with at least 97 projects (14 percent of care projects we identified) and $503 million (17 percent) of all state and local recovery dollars currently allocated to care investments. Funds are supporting state and local expansions of children’s access to preschool services by increasing capacity, expanding income eligibility and lowering costs for families, strengthening the early learning workforce, and building physical infrastructure.

• Michigan allocated $121 million in funding to expand access to its Great Start Readiness and Head Start programs, serving at-risk children.
• Pima County, Arizona funded $30.2 million toward a new program to provide preschool access to children whose families are earning 200 percent of the Federal Poverty Guidelines or less.
• The City of Los Angeles, California is using funds to renovate 10 pre-kindergarten facilities in low- to moderate-income neighborhoods, hire teachers, and provide classroom supplies.

Bolstering Home and Community Based Care

At least 92 fiscal recovery fund projects (13 percent of care projects identified), focus on improving job quality for home care workers, supporting family caregivers, and allowing older Americans and individuals with disabilities to remain in their homes and stay active in their communities. Several state-level projects provided bonuses directly to home care workers, and others increased provider reimbursement rates. Other projects are funding aging in place programs that support in-home safety and food security for older adults and people with mobility challenges. Across these efforts, states and localities are investing $429 million (14 percent) of all fiscal recovery dollars currently allocated to care investments.

• Nebraska is using $20 million to increase rates for providers of home- and community-based services to people with developmental disabilities.
• Maine established a Family Caregiver Grant Pilot Program to increase the number of families served by the Respite Care Fund.
• In Puerto Rico, several municipalities are recruiting home care workers for newly developed programs that will provide care services to low- and moderate-income households.
• Tarrant County, Texas is identifying and funding community partners, nonprofits, and public organizations that provide quality programming for aging populations, and increase availability of quality home and community-based care services for disabled seniors.

Bridging Gaps in Paid Family and Medical Leave

Roughly 10 percent of all fiscal recovery funding currently allocated to care investments ($312 million) is supporting at least 55 recovery projects focused on paid family and medical leave, representing 8 percent of identified care projects. Many state and local governments are using the funds to supplement pandemic-related paid leave funds, and at least one supports a broader paid leave program.

• Colorado established FAMLI, or paid Family and Medical Leave Insurance in 2020, and opted to use $57 million to fund the state’s share of employer premiums to cover its own workforce for the next six years, freeing up those funds for other uses.
• Massachusetts spent $159 million to fund pandemic-related paid sick leave for all of its residents.
• Volusia County, Florida; Minnehaha County, South Dakota; and Caldwell City, Idaho used smaller amounts of funds to provide supplemental sick leave during the health emergency, as did many other county and city governments.

Providing Tax Relief for Working Families

Spending on tax relief programs to lower care costs for families is not prevalent and accounts for only 10 of the more than 700 care projects we identified in state and local recovery fund reporting data. A handful of local governments are using the funds to conduct outreach about available tax relief, provide support for filing for tax credits, or to replace lost funding.

• Colorado is supporting outreach and tax filing assistance to families through the 2024 filing season to help connect families to the expanded Child Tax Credit, Earned Income Tax Credit, and Child & Dependent Care Tax Credit.
• In Harris County, Texas, funds supported a contract with a nonprofit organization that helped the families of more than 3,000 children claim the Child Tax Credit.

As the nation recovers from a global pandemic and prepares for tomorrow’s challenges, no one should leave sizable opportunities to invest in the strength and wellbeing of Americans on the table. Funds must be obligated by December 31, 2024, but do not need to be spent down until December 31, 2026. Given the scale of some of the projects featured here, this timeframe may still feel brisk. Still, not all projects are “large ticket”, and many rely heavily on existing capacity and partnerships within communities.

That said, program integrity matters, and these investments should be targeted and meaningful.

While government officials are eager to support community recovery efforts, they may feel uneasy about taking on potential risk related to administering flexible federal funds. This unease may feel particularly acute in communities without significant intergovernmental expertise or hands to spare for grant making. For example, tribal entities reported concerns about misspending federal money. Ambitious programs need not be large to have an impact, and many tools exist to help public officials understand the resources available to their communities and make informed decisions about how to leverage them.

Gather Information About SLFRF Care-Focused Projects

Information about currently funded projects offers state and local decision makers the opportunity to understand options for investing available recovery funds in care projects. This analysis uses data directly from the Treasury website, but the Pandemic Oversight website may be a more user-friendly portal for accessing the underlying project data. This searchable resource includes a full list of recipients, projects, and recovery plans. One can also browse projects from the Pandemic Oversight dashboard, and federal pandemic oversight data stories illuminate spending patterns and trends in areas such as housing assistance, unemployment insurance, and tribal spending–though not all of these analyses focus specifically on State and Local Fiscal Recovery Funds. In addition, many civic associations and peer organizations are reporting on the uses of fiscal recovery funds, including:

• Brookings Metro, which also published a SLFRF tracking tool in partnership with the National League of Cities and the National Association of Counties
• Center for Budget and Policy Priorities
• National Conference of State Legislatures, whose state-level allocation data also informed New America’s analysis
• NLC report with case studies from four cities leveraging flexible recovery funds to support young children and families
• Lead Together, a coalition formed to share learnings and encourage use of recovery funds

Understand Compliance and Reporting Responsibilities

The Pandemic Oversight website has a repository of oversight materials including audit reports, but the bulk of compliance and reporting materials related to State and Local Fiscal Recovery Funds are available on the Treasury Department website. Resources include:

• Compliance and Reporting Guidance
• A menu of self-service options
• A portal for requesting funds, along with training materials for using the portal
• Practical tools for compliance needs like a tool for determining Low and Moderate Income (LMI) thresholds and an Equity & Outcomes Resource Guide
• A number of webinars and presentations on evidence and evaluation and other topics

Other entities have developed job tools to assist with administering the state and local recovery funds:

• The State of Kansas grant compliance checklist and guide
• Internal control guidance from state and county auditors
• Dashboards communicating SLFRF spending priorities and expenditures at the local level, like the San Francisco Bay Area Recovery Dollars Tracker and Boston’s ARPA Project Tracker

Engage with the Community to Determine Priorities

Documenting community engagement activities is a required component of SLFRF Recovery Plans, but these activities can continue to inform recovery efforts throughout the entire funding period. These activities inform priority areas for non-obligated flexible fiscal recovery funds, but can also serve to influence the use of the buckets of funds that states and localities obligated without concrete plans. State and local governments are using a range of strategies to understand and assess constituent needs, including formal needs assessments, surveys, listening sessions, and other solicitations for feedback or proposals from the community. For example:

• Travis County, Texas conducted and reported on a community survey to understand residents priorities for use of recovery funds.
• Milwaukee, Wisconsin collected community input on funds during a series of listening sessions in February, 2023, as well as an online survey available in English , Spanish, and Hmong.
• Frederick County, Maryland is using funds to conduct a comprehensive assessment of child care needs within the community: “There has not been one comprehensive assessment or study within the County to illustrate the picture of our current child care market (i.e. costs, location, slots, etc.) and the needs, values and constraints of families… the market study is meant to create a picture of the child care supply within the County and community specific demand and identify potential solutions to bolster Frederick County’s child care market.”

Engagement efforts should be meaningful and designed to elicit diverse perspectives. A Brookings Institution case study on the equitable distribution of funds suggests that language access, advance notice, work-friendly timing, accessible locations, child care, and digital inclusivity are all important for successful engagement.

Partner to Share the Burden of Grants Administration

State and local governments are using fiscal recovery funds to hire grant management staff, which may be a promising model for localities facing limited procurement capacity and staffing constraints. Working with trusted community-based partners is one way to increase this capacity, as demonstrated by the Municipality of Anchorage's work with thread, Alaska’s Child Care Resource and Referral Office, alongside Alaska’s Child Care Program Office and the Mat-Su Health Foundation. They report that grants to providers helped 90 percent of Alaska’s child care businesses remain open. They received an additional $8.2 million from Alaska’s recovery funds to continue this important work, including hiring a full-time employee to work on grant administration.

Use Blended Funding Streams for More Substantial Investments

State and Local Fiscal Recovery Funds offer a unique opportunity for communities, advocacy organizations, and philanthropy to organize around how best to support state and local governments to spend these funds equitably and efficiently. To stretch the reach of the federal recovery investment, SLFRF allocations may be blended with other funding sources. For instance, recovery project dollars for isolated capital expenditures may be matched with funds from other sources for sustained delivery. Additional project funding may come from state and local taxes, nonprofits and philanthropic organizations, or other local partners with shared interests. One community college partnered with an early learning alliance to provide on-site child care that helps student parents meet their educational goals. Additional resources can also supplement federal funds to support general capacity for spending plan development, community member engagement, fund administration, project reporting and oversight, activity evaluation, and more. While SLFRF and other pandemic recovery dollars may be temporary, they can be leveraged in creative ways for sustained impact, and make the case for substantial investments.

Prioritize Evaluation and Build Evidence Capacity

Public officials must be good stewards of taxpayer dollars and should plan for evaluations and meaningful performance indicators whenever feasible. Tracking the impacts and lessons learned from this unprecedented federal investment will bolster the evidence base for future policy development and inform efforts to secure sustained community investments in care infrastructure. Treasury worked with the Office of Evaluation Science at the General Services Administration to examine federal SLFRF administration processes and incorporated their findings into an overall learning agenda to inform current and future practice. At the state level, Maine budgeted an additional $150,000 to formally evaluate a respite care pilot program, and findings will be reported to the legislature.

Corrected at 5 p.m. on May 1, 2023 to clarify that the partnership is between thread, Mat-Su Health Foundation, and the Municipality of Anchorage, and to include an evaluation example from the state of Maine.

It’s not too late to use State and Local Fiscal Recovery Funds to move forward a comprehensive care agenda. States and localities may designate specific uses for the funds through December 31, 2024 and have until December 31, 2026 to spend them down. The findings presented here are incredibly encouraging and illustrate the state and local demand for strengthening the care economy when there are resources available to support these investments. State and local recovery resources are funding hundreds of promising care investments with budgets ranging from thousands to millions of dollars. Clearly, leaders across the country recognize the role of a solid care infrastructure as a foundation for equitably rebuilding resilient communities and strong local economies in the wake of the pandemic.

If leaders act soon, billions of dollars in federal flexible recovery funds remain available to support the American economy through investing in child care, expanding preschool and early learning opportunities, raising wages for care workers, and supporting families. The first half of 2023 is a critical period for organizing around state and local use of remaining SLFRF allocations and tracking the impacts of this unprecedented federal investment. Fiscal recovery funds provide billions of dollars for cash-strapped states and localities to enable pandemic recovery and expand innovation using federal resources. The places that have carefully mapped out strategies for using recovery funding resources demonstrate how critical improving our care infrastructure is, but opportunities still exist to propose investments that support workers and families. A recent analysis of Treasury reporting data found that states have obligated 55 percent of allocated funds, while local governments have obligated 45 percent. State and local leaders still have time to adjust spending priorities in response to the care crisis that threatens not only our economic recovery, but also the wellbeing of our families and communities. These projects can be a key stepping stone in the path to a more robust, comprehensive care infrastructure that lowers costs for families and invests in America and its people.