Billions of Dollars Available for States and Communities to Invest in Care

ARPA made an unprecedented federal investment in America’s care economy and infrastructure. At least $152.3 billion of ARPA care investments were explicit: 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 continue to provide an important but temporary scaffolding for America’s faltering care network, and are an important component of our economic recovery from the pandemic–though the clock is running down. States have until March 2025 to spend down the temporarily enhanced HCBS. But, many opportunities have expired and the period for obligating Child Care Stabilization grants is closed. Supplementary discretionary child care dollars can still be obligated until the end of FY 2023, giving the handful of states who have not yet developed plans for using these funds a narrow window to do so. 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.

Another pathway to temporarily shore up the care economy remains open until the end of 2024: State and Local Fiscal Recovery Funds, which delivers $350 billion to state, local, and tribal governments for pandemic recovery and response. Our analysis of recovery fund reporting data found a variety of innovative and ambitious ways that states and localities are using SLFRF to bolster care infrastructure at the ground level (see footnote). We estimate that SLFRF resources are funding at least $2.84 billion in care investments in the five areas for sustained investment identified in the Biden administration’s Build Back Better framework.

We found more than 500 examples of ways states and localities are leveraging flexible federal recovery funds to advance care in five specific areas: child care, preschool, long term care and home and community-based care, child tax credit enhancements, and paid family and medical leave. The average project budget is $5.4 million, but half of them are quite modest at $637,000 or less. These investments present an opportunity to learn from states and communities and design future models for universal care across the lifespan.

• Child care. Child care-focused programs are frequent SLFRF recipients, though the way states and localities use the funds varies. Some projects are supporting child care providers, including payroll and reimbursement support, workforce development, and technical assistance. Projects offering parental support focus on increased subsidies and scholarships, and expanded support for friends and family network providers. Other projects are making significant investments in physical infrastructure, workforce development, or innovative program features.
• Universal Preschool. Some states and localities are using SLFRF to move towards adopting a universal pre-kindergarten framework. SLFRF projects are increasing the number of available spots and in some cases, expanding eligibility criteria.
• Long-term Care/ Home and Community-based Care. Elder and home care is supported by SLFRF in multiple ways: recruitment and retention of skilled home care workers, direct services (in home or adult day centers), and programs supporting aging in place or home-based care.
• Child Tax Credit Enhancements, and other Tax Relief. The Child Tax Credit expansion increased economic and material well-being for children and families with little or no detriment to employment. A few local governments are using SLFRF to educate filing households about this benefit, or to replace lost funding.
• Paid Family and Medical Leave. Several state and local governments are using SLFRF to supplement COVID-19 related paid leave funds.

Our early findings are incredibly promising. SLFRF resources are funding hundreds of promising care investments with budgets ranging from thousands to millions of dollars. But, there’s still an opportunity to make care spending a priority for non-obligated flexible fiscal recovery funds. There is also great potential to influence use of the buckets of funds that states and localities obligated without concrete plans (e.g., sharing and implementing best practices). At the same time, there must be a focus on tracking the impacts of this unprecedented federal investment to bolster the evidence base for future policy development.

Even as the country attempts to move on from the pandemic, its effects are still visible, with huge implications for American families and the broader economy. For example, far more workers are missing work due to child care problems now than before the pandemic. A new ReadyNation report estimates that lost earnings, productivity, and revenue due to inadequate child care costs families, business, and taxpayers a whopping $122 billion per year, a doubling of the pre-pandemic figure. And, while widespread, this issue is disproportionately impacting many low to moderate-income communities, where a lack of child care remains the primary challenge in finding and maintaining employment. But it’s not just a child care problem. 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 active workforce participation and providing care for adult loved ones who depend on it. 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.

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. The SLFRF windfall provides billions of dollars for cash-strapped states and localities to unleash on advancing pandemic recovery and expanding innovation using federal resources. Some places have carefully mapped out strategies for using SLFRF resources, but opportunities still exist to propose investments that support workers and families in the gap between the phase out of pandemic related programs, and the future implementation of a more robust, comprehensive care infrastructure like the one envisioned and articulated by the Biden administration. State and local leaders have the flexibility to adjust spending priorities in response to the growing care crisis that threatens both our economic recovery, and the well-being of our families and communities.

1. Source: National Conference of State Legislatures (accessed November 2022) and Treasury’s October 2022 quarterly reporting data (accessed January 2023). State coverage includes fifty states and the District of Columbia, and city and county data is limited to localities with populations > 250,000, including territories. Data is self-reported to Treasury.gov and subject to change.