Warren/Smith Plan Would Provide the $50 Billion That the Child Care Industry Needs

The plan calls for a federal investment of $50 billion to bail out the industry and ensure its long-term survival
Blog Post
May 4, 2020

As states start to take gradual steps to reopen their economies, the link between the country’s child care system and the ability to rebuild the national economy has come into focus. Texas, for example, has begun to slowly reopen its economy and expects many employees to return to work, but licensed child care centers remain available only for essential workers. This has forced many parents to make a tough decision: risk losing their income or scramble to find a caregiving arrangement for their children while they work, perhaps through the use of babysitters or other unregulated child care options.

Recognizing that a healthy child care industry is essential for allowing parents to be able to return to work, Senators Elizabeth Warren (D-MA) and Tina Smith (D-MN) recently unveiled a plan for a federal investment of $50 billion to bail out the industry and ensure its long-term survival. The emergency funding would be used for three major purposes.

First, the plan provides funding for child care providers who have stayed open to care for the children of essential workers. These providers are typically receiving less revenue due to reduced enrollment at the same time that they’re facing increased costs as states require them to follow more stringent guidelines around practices such as cleaning and sanitizing and maximum class size. The Warren/Smith plan would also provide paid leave and hazard pay for the early childhood educators who are risking their health by coming to work while also eliminating all fees for essential workers who use child care during the pandemic.

Second, the plan would provide funding to keep providers financially afloat and educators on the payroll. About 60 percent of child care programs are fully closed in an effort to curb the spread of coronavirus, meaning that revenue has been essentially frozen for most providers. The funding included in the Warren/Smith plan would allow providers to fully pay their staff, pay their mortgage or rent, provide employee benefits, and meet other expenses, including the cost of training staff on new health and safety practices and distance learning opportunities. Importantly, the plan would also fully fund the Paycheck Protection Program, which allows small businesses, such as child care providers, to apply for forgivable loans worth up to 2.5 times their average monthly payroll expenses.

Finally, the Warren/Smith plan would provide funding to begin to address problems with the child care industry that existed prior to the coronavirus pandemic, such as a lack of investment in infrastructure and extremely low wages for many early childhood educators. According to the Transforming the Financing report that was released in 2018, the total cost of offering accessible and affordable early childhood education with a highly qualified workforce amounts to at least $140 billion per year; the Warren/Smith plan would be a crucial first step to realizing that vision. While $50 billion is a large amount of money, Smith put it into context: “A lot of people said ‘$50 billion, that’s unbelievable — that is just such a big number!’ But at the same time, we were talking about $60 billion for a bailout out of Boeing, and $50 billion to help the airline industry with loans and grants.”

The child care industry received some financial assistance in the CARES Act, which included $3.5 billion for the Child Care Development Block Grant (CCDBG) that subsidizes child care for families with low incomes. While this was a good start, as the economic fallout from the pandemic has widened it’s become clear that much more funding is needed to ensure a functioning child care industry. A new brief from the National Women’s Law Center and CLASP argues that at least $9.6 billion is needed each month to fully fund existing child care providers so that they can continue to pay their staff and offer free emergency care for an estimated six million young children of essential workers. And a new analysis from the Center for American Progress finds that almost 4.5 million child care slots could disappear without adequate financial support.

New polling from Save the Children Action Network and Child Care Aware of America finds that there is overwhelming, bipartisan support for the kind of financial assistance to the child care industry envisioned by the Warren/Smith plan. Specifically, 87 percent of voters support the idea of providing the financial support necessary to enable child care providers to make payroll and pay for expenses such as rent and utilities. As Congress prepares to return to work, it’s more important than ever that voters let their elected representatives know that it’s imperative that the next stimulus bill include substantial funding for the child care industry. After all, employees won’t be able to return to work if they don’t have a reliable, high-quality provider to care for their young children.

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