The Value of Virginia’s Early Childhood Investments

Blog Post
Landscape of Richmond, Virginia with tall buildings and a railroad bridge.
Oct. 30, 2023

It’s not every day you come across an investment that pays for itself within a year. A new report finds that early childhood is one of them. Analysis by the Prenatal-to-3 Policy Impact Center estimates that Virginia’s investment of an additional $309 million in its early care and education (ECE) system will generate nearly $400 million annually in increased family income and tax revenue for the state, with even greater returns in the years to come.

Congress has yet to agree on what the funding levels for child care programs will be for the current fiscal year despite bipartisan support for ECE. Based on the divergent proposals put forward by the House and Senate leading up to the September 30 deadline, and the subsequent lack of agreement from either side, it seems optimistic to think that funding levels for child care will be as large as they were during the COVID-19 pandemic. This is a mistake because we know that investing in our nation’s ECE system greatly benefits not only the children and families who access these programs but also the economy. And, the new report provides even more proof that ECE is worth investing in.

Using mostly temporary federal relief dollars, Virginia made significant investments to increase the availability and affordability of two state programs serving families with low-to-moderate incomes. First, investments in the Child Care Subsidy Program included setting reimbursement rates at the true cost of providing quality child care (rather than the market rate), expanding income eligibility for subsidies, committing to serve every family who applies for a child care subsidy, and reducing family copayments. Second, the state invested in the Mixed Delivery Program, which supports private, community-based child care programs. These investments combined resulted in new access to child care for more than 11,000 children from birth to age five and out-of-school care for close to 4,000 children ages five and older. A portion of the funds also went towards quality and accountability efforts, such as the state’s quality rating and improvement system, which will benefit all children who access publicly funded ECE programs.

Although the full value of the investment extends beyond children under age five, the report’s benefit-cost analysis focused on the estimated impacts for the 11,151 additional children who now have access to child care. First, because of the expanded access to affordable child care, nearly 11,000 new mothers will return to work. These increased family earnings will lift more than 5,500 children out of poverty and generate at least $324 million in annual taxable income. Moreover, expanded access to subsidies enables families to redirect some of their previous child care spending on other necessities, increasing annual disposable income by almost $40 million. The increases in taxable and disposable income will generate over $30 million in state tax revenue.

These numbers describe the estimated return in the next year alone; the image below summarizes the total expected outcomes and economic impact as a result of this investment. As shown below, the state’s investments will also support family wellbeing, healthy child development, and a host of academic outcomes from school readiness and chronic absenteeism to high school and college graduation.

Source: Prenatal-to-3 Policy Impact Center, Early Investment, a Lifetime of Returns: Articulating the Value of Early Childhood Investments in Virginia, 2023

The report authors used existing research to estimate returns, but tracking the actual return of this investment can provide further evidence for investing in early childhood. Ongoing data collection and analysis can also inform future policy decisions. To do this, the authors discuss the need for an integrated, longitudinal data system that collects information for all children starting in early childhood across both public and private settings. More importantly, continued investments in the ECE system and workforce are necessary so that child care is available for families who need it.

The report shows the return to the state as a result of their investment in ECE, and a majority of the investment came from federal relief dollars provided during the COVID-19 pandemic. Last week, thanks to efforts led by the Democratic Women’s Caucus, the Biden administration called on Congress to pass $16 billion in emergency child care funding for the current fiscal year. As the House and Senate negotiate over the next few weeks, I hope they prioritize making the investment that is so needed for a faltering ECE system. What would be even more impactful is for Congress to not only replenish these expired emergency funds but also commit to increased, sustained funding to realize even greater returns for our nation’s children, families, and future.