Strengthening a Robust Economic Recovery with Child Care

Using State and Local Fiscal Recovery Funds to Support the Workforce
Mother picking up her child from child care
Sept. 19, 2023

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. These weaknesses undermine robust pandemic recovery and economic development by undercutting the labor supply—particularly at the expense of working mothers. Many state and local governments leveraged State and Local Fiscal Recovery Funds (SLFRF) from the American Rescue Plan Act (ARPA) to close the care gap, supporting both working families and the country’s economic recovery. Billions of dollars in SLFRF remain available for state and local leaders to bolster their care infrastructures, but these funds must be obligated by the end of 2024.

A Robust Recovery and Sustained Economic Growth Require Affordable, Accessible Child Care

New America's analysis of recovery fund reporting data found that states and localities have directed 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 the use of dollars that states and localities obligated without concrete plans. Specifically, funds must be obligated by the end of 2024 and spent down by the end of 2026. State and local leaders have the ability 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 gaps as pandemic-related programs and care-specific ARPA funding streams expire.

Expiring child care stabilization funds are an immediate concern. ARPA child care funds provide financial relief to providers and are credited with preventing 220,000 provider closures and preserving child care access for 9.6 million children and their working families. Currently, these funds are set to expire in September, 2023. The Century Foundation has reported extensively on the child care cliff and the impending harmful impacts to families, children, and child care providers. In the state of Utah, payments to providers will decrease by 75 percent in October, immediately after the funds expire. The Century Foundation estimates that nationwide, 3.2 million children will lose child care spots and that 70,000 providers may close. As they and many others have pointed out, this situation deserves sustained federal funding, but despite broad and bipartisan support for child care across the country, Congress has not been moved to act on behalf of working parents and their young children.

The Relationship between Child Care and a Strong Workforce

  • Two-in-five full-time working parents have children under age six.
  • 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, the lack of child care is a primary challenge in finding and maintaining employment.
  • A U.S. Department of Labor Women’s Bureau analysis found that higher child care prices are associated with lower rates of employment among mothers.

Case Studies: Using State and Local Fiscal Recovery Dollars to Support the Workforce through Child Care

At the state and local level, many leaders have made the connection between a strong child care sector and a robust economic recovery by focusing on care as an essential component of comprehensive workforce development programs. These case studies offer examples of SLFRF-supported projects to inspire and guide communities that are interested in bolstering their local workforces and economies by dedicating a portion of their recovery funds to child care.

We focus on five case studies—two states, one region, one county, and one city—to demonstrate how different locations are leveraging ARPA’s flexible funding to expand the child care workforce, lower child care costs for families, engage employers in child care access, and fund new child care facilities. When selecting projects for these studies, we looked for workforce focus, diverse approaches, and—where possible—planned evaluation activities. While the ultimate success of these programs is yet to be seen, an evaluation component helps ensure that the impact of these projects can ultimately be measured, understood, and ideally replicated.

Phoenix, Arizona

Project: Sky Harbor Airport Worker Scholarships

Region: Southwest

SLFRF Investment: $5 million

Child Care Investment: Engaging Employers in Child Care Access, and Lowering Child Care Costs for Families

Summary: New aviation department child care program for airport employees addresses child care access in the area.

Planned Evaluation: No

Six adults stand in an airport terminal with an oversized check representing the investment in child care scholarships.
Sky Harbor Airport kicks off Airport Worker Scholarship program.
Source: Reprinted with permission by the Phoenix Aviation Department.

Why This Project

Sky Harbor Airport has been referred to as the largest economic engine in the State of Arizona. The airport supports more than 57,000 workers, has an economic impact of $38 billion in the region, and supports over 269,000 jobs in Arizona. The airport serves nearly 46 million passengers a year via 23 airlines, and its operation and performance have significant economic impact.

The aviation industry experienced extreme worker shortages as the COVID-19 pandemic hit. According to Reuters, “shortages of workers like baggage handlers and customer service agents led to long lines and delayed luggage during the peak summer travel season last year, marring the industry's recovery from the COVID-19 pandemic and spurring demand for new initiatives to attract workers.”

The worker shortage may have been exacerbated by the care challenges facing working families around the country. Child care access for aviation employees is a particular challenge as airports are located outside of city centers and require around-the-clock staffing.

According to a recent article on child care as a workforce support at airports, some airport directors discussed child care expansion prior to the pandemic, but interest intensified as COVID-19 put additional pressure on working parents. The Phoenix Aviation Department surveyed 800 Sky Harbor Airport employees and found that 75 percent were interested in on-site child care.

Investment Specifics

In late 2021, the Phoenix City Council proposed and approved a SLFR-funded child care investment to ensure vital frontline workers who support the essential travel operations of the airport have the child care they need. In 2022, the Aviation Department officially launched an airport child care scholarship program to support workers and the aviation industry. $1 million was directed to constructing an airport child care facility, and $4 million was allocated for scholarships for families that meet income eligibility requirements.

How They Did It

The Aviation Department contracted with First Things First, a state agency, in order to stand up the child care scholarship program. First Things First is tasked with expanding early education and family support systems, including the Quality First scholarship program that provides access to quality child care. Through an intergovernmental agreement, the agency also processes applications and determines eligibility for the City of Phoenix Airport Worker Scholarship.

Employees making under 300 percent of the federal poverty level (FPL) were initially eligible, but the program has expanded to accommodate families earning under 400 percent FPL. Eligible badged workers submit applications through an online portal or via PDF, and applicants are contacted within three business days for eligibility determination. Once approved, “scholarships may be used at any eligible early education or child care program that is located within Maricopa County and participates in the First Things First Quality First Program.”

Project Impact

At the initial launch of the program 37 families were enrolled and the airport hopes to expand the program to serve more. Construction of a facility for future airport child care needs at the 44th Street Sky Train Station is currently underway. Beyond Arizona, other airports are looking to bolster their workforce with child care services and supports. According to a recent news article, “at least three other U.S. airports are devising new child care plans of their own, joining the growing ranks of employers trying to expand access to a service that remains a costly barrier for many caregivers in their prime working years.”

Franklin County, Ohio

Project: Franklin County RISE program

Region: Midwest

SLFRF Investment: $22.5 million

Child Care Investment: Lowering Costs for Families, Developing and Supporting the Child Care Workforce

Summary: Franklin County, Ohio, invested $22.5 million to stabilize and improve child care support in the county, including early learning scholarships of up to $10,000 for eligible families, incentive payments for licensed child care providers, and rental assistance for child care workers.

Planned Evaluation: Yes

Why This Project

Prior to the COVID-19 pandemic, Franklin County had worked with residents to develop community driven-priorities, and child care was an important one. The county had a goal of making early childhood care affordable, accessible, and high quality for families.

When the pandemic hit, Franklin County’s child care system was further destabilized and in crisis. From August 2020 to August 2022, over 230 child care providers closed their doors. The County’s Recovery and Resiliency Task Force, created to address the impact of the pandemic, immediately prioritized supporting child care access given its importance to families.

Investment Specifics

The County decided to make a significant investment (nearly 10 percent of their overall State and Local Fiscal Recovery funds) to not just stabilize but improve child care access for residents. They invested in multiple reinforcing efforts, including:

  • ~$11 million for scholarships available for families at risk of losing publicly funded care (up to $10,000 per family);
  • ~$11 million in incentive awards for providers—for staying open, for improving quality (star rating), for serving families during non-traditional hours, and for accepting publicly funded children; and
  • $500,000 for rent and utility assistance for child care teachers.

The investment is enabling more families to access child care and supporting more parents in going back to work. To meet these needs, Franklin County RISE scoped the program to target three specific goals.

  • To help parents with costs of care, child care scholarships are available to families who exceed income thresholds for the federal child care assistance program, but who still struggle with the cost of child care.
  • To help providers stay open and meet families needs, incentive payments to child care centers were focused on providers that stayed open and those that were willing to offer extended hours. Funding was also provided to child care teachers to assist with rent and utility expenses, in a field where compensation rarely covers the cost of living.
  • To improve the quality of child care, incentive payments were also offered to those who improved the quality of their programs, and technical assistance and training was provided to centers.

How They Did It

By working with Action for Children, central Ohio’s Child Care Resource and Referral agency, Franklin County shifted administration of the program into the hands of a trusted community resource. Action for Children offers parenting education classes; training, coaching, and technical assistance for early childhood providers; and child care resources and data for workforce development, public awareness, and advocacy.

Project Impact

The Franklin County RISE program has already made a meaningful impact on child care in the community in its first year. The program has filled 102 positions with signing bonuses, awarded $2.3 million in incentives to providers for serving during non-traditional hours, increased program quality, provided 100 child care workers with financial support, and funded $10.3 million in scholarships, serving 1,225 children.

Southwest Virginia

Project: Ready SWVA Hub and Spoke Project

Region: South

SLFRF Investment: $3.5 million to United Way of Southwest Virginia

Child Care Investment: Developing and Supporting the Child Care Workforce, Sustaining Growth with Facilities and Infrastructure

Summary: The Commonwealth of Virginia, along with community partners, is investing in the development of a new child care facility as well as growing and supporting the child care workforce.

Planned Evaluation: Yes

Rendering of planned conversion of former retail site to an early childhood hub.
Ready SWVA Hub and Spoke
Source: Reprinted with permission by Ready SWVA.

Why This Project

Accessing child care can be challenging for families in rural communities. They have fewer options, as nearly two-thirds of rural families live in a child care desert, defined as areas with more than three children for every licensed child care slot available. They spend more of their income on child care and travel further distances to access it. The Southwest Virginia region has a three times larger gap (29.3 percent) between the supply and need for child care compared to the Commonwealth overall (11.9 percent) and urban Virginia (9 percent), with a potential gap of 7,000 slots for the region’s children. The lack of access to child care is estimated to cost Virginia $2 to $3 billion over 10 years. Attracting new business opportunities to the region is a high priority, but success will depend in part on a ready workforce.

Investment Specifics

In the 2022-24 state budget, the Virginia General Assembly allocated $3.5 million of federal state and local recovery funds to the Ready SWVA initiative. The United Way chapter is using the funding to secure a child care operator for what will be its hub, which will serve more than 300 children up to age 5 and create 62 positions at a base pay of $15 per hour.

How They Did It

Child care investments are a significant component of economic development initiatives, and teaming with trusted community partners can help build capacity efficiently. United Way of Southwest Virginia launched its Ready SWVA in December 2021 with a mission to:

  • Provide quality, accessible child care;
  • Develop a regional cohort of early childhood educators;
  • Support regional strategies to attract new talent, young families, and higher-paying jobs;
  • Support small child care businesses with support from a shared services alliance; and
  • Provide long-term outcomes of a healthy, educated, and financially stable workforce by preparing young students for school success.

Leveraging SLFR funds to supplement an existing effort allowed SWVA to take on an ambitious capital project that might have been out of reach without this influx of funds. While some states and locations hesitate to invest one time funds into uses that will require ongoing investment, child care projects that create space or reduce start-up costs for providers may jump start sustained growth in the sector—which in turn supports sustained growth in the local economy.

The $3.5 million child care investment was braided with multiple funding sources into a comprehensive plan for a regional workforce development center, with a total project cost of $23 million. According to local news, “the hub and spoke model is an initiative that began taking shape in 2022 after numerous convenings of community members, educators, private/public sector leaders, and families looking to understand, and solve, a lagging economy in Southwest Virginia.”

A proposed site was selected in Abingdon, Virginia: a long vacant retail space with ample square footage for adaptive reuse. Requests for operator and design-build proposals closed in December 2022, and the project plan was confirmed in May 2023 and slated to start construction in July 2023.

According to RFP documents, the 87,000 square foot comprehensive workforce development center may include:

  • 20,000 square feet for early childhood services, providing care to approximately 300 children ages birth to five including classroom space, indoor/recreation space, cafeteria space and administrative offices;
  • 30,000 square feet for youth and adult workforce development;
  • 25,000 square feet for professional offices and meeting/training room;
  • Warehouse space of approximately 7,500 square feet; and
  • 2,500 square feet for kitchen and food preparations.

Project Impact

With a planned opening date in August 2024, the center could accommodate hundreds of families, create dozens of jobs, and provide training opportunities for future early childhood workforce. While many factors may influence the ultimate success of this particular project and its impact on the region’s economy and workforce, it is embedded in a community-wide strategy for growth. Ready SWVA has created an early care and education enrollment hub, and the new workforce center will include a shared service alliance to assist the region’s 208 existing child care providers—many of whom are struggling to stay in business without sustained investments. Engaging local economic development leadership as stakeholders may help rally support for child care as a critical driver of a strong workforce.

State of Delaware

Project: Early Childhood Innovation Center

Region: Mid Atlantic

SLFRF Investment: $10 million

Child Care Investment: Expanding the Child Care Workforce

Summary: A partnership with Delaware State University will establish an Early Childhood Innovation Center, supporting current and future early childhood educators across the state.

Planned Evaluation: Yes

Rendering of the future Early Childhood Innovation Center, a contemporary red brick building with spacious walkways.
Early Childhood Innovation Center
Source: Reprinted with permission by Delaware State University.

Why This Project

A third of Delaware’s children are not kindergarten ready due to a number of factors including child poverty, food and housing insecurities, domestic violence and other trauma, and lack of access to quality health care, said Dr. Shelley Rouser, Chairperson of Delaware State University’s Education Department. “The teachers and caregivers they [work with] have to be aware of these challenges and prepared with the skills to overcome them.”

Contributing to this challenge is a lack of child care access across the state. The Philadelphia Federal Reserve Bank noted in 2022 that the total licensed capacity of providers was 35,481, but there are 54,261 children under the age of five in the state. Low wages and few career pathways into the profession have limited the field, with Delaware experiencing a decline in child care educators even before the COVID-19 pandemic. The pandemic exacerbated the challenge, and child care educator shortages prevented families from finding child care and getting back to work.

Investment Specifics

In fall 2021, Governor Carney announced a partnership between the Governor’s Office, the Department of Education, Department of Health and Social Services, and Delaware State University that would establish an Early Childhood Innovation Center (ECIC). The goal of ECIC is to support more qualified, well-paid child care educators and expand access to affordable child care for Delaware families in need.

The ECIC was established as a new initiative to redesign Delaware’s early childhood education support model, funded with $30 million from the state, $10 million of which is from the American Rescue Plan.

How They Did It

With the pandemic exacerbating an existing child care educator crisis in Delaware, state leaders decided to make a significant and long-term investment to improve the field. The goal was to create an effort 100 percent dedicated to advancing the child care educator workforce across the state—developing the supports, incentives, and guidance needed to sustain a robust child care workforce. ECIC serves as a central hub for child care workforce initiatives, research, and strategic partnerships across the state. Centralizing these supports under one roof with a higher-education partner, especially an Historically Black College and University (HBCU) partner, was vital to create and sustain a center built on a strong philosophical commitment to the diversity of the Delaware early childhood community.

The effort is committed to addressing the real barriers workers have in participating in the field, so the work began in 2022 with intense stakeholder engagement and feedback to inform the design of the program and the support ECIC provides to workers. The program is also committed to tracking what is working and sharing it nationally, leveraging existing research and collecting and analyzing program data to track impact.

In early 2023 ECIC began hiring their team, piloting components of the program, and developing branding for the effort. The program officially launched in July 2023 and broke ground on a new ECIC facility on the Delaware State University campus.

ECIC develops new and innovative child care educator recruitment, retention, and compensation strategies. They provide scholarships so individuals can earn internationally recognized credentials, including Child Development Associate (CDA), Associates, and Bachelor's degrees, to prepare them for successful careers in early care and education.

The Center also offers comprehensive support to those entering the field to reduce the many barriers to entering the child care profession. Supports include scholarships for tuition, stipends for transportation, one-on-one mentoring/career advising, on-site child care while attending class, technology/laptops, and materials and supplies. The new scholarship program will work with all four Delaware institutes of higher education who offer degrees in early childhood education, and the ECIC will be developing an early childhood education navigator program to ensure barriers are removed and a clear pathway to a degree is accessible to all.

The program will offer support in multiple languages and engage groups who often don’t pursue the child care profession, such as males. ECIC will empower and cultivate a highly-skilled, educated, and diverse workforce, focused on communities historically impacted by inequalities.

Project Impact

As of launch in July 2023, the center supports 120 students pursuing their Associates or Bachelor's degrees within local institutes of higher education and a regional partnership to support Spanish speaking early childhood education professionals. The ECIC has also welcomed over 200 CDA candidates in one of three cohort models that provides dedicated coaching to ensure all components of the CDA are mastered. The ECIC has designed a robust cohort model that includes on-site coaching, goal setting, anti-bias training, exam preparation, and pre-observation supports. The ECIC has partnered with local early childhood organizations and high school Early Childhood Career Pathway programs to ensure support is focused on both the coming and current workforce.

As part of the funding, a new state-of-the-art facility will be built on the University Campus. The new building will house the Delaware State University Laboratory School on the first floor, serving infants through age five, and provide ample opportunities for local and national early childhood education professionals to observe best practices and innovative strategies in early childhood development. The second floor will house the ECIC administrative and programmatic suite along with classrooms and community spaces for collaborative learning and advocacy.

State of Idaho

Project: Child Care Expansion Grants

Region: Northwest

SLFR Investment: $30 million for Child Care Expansion Grants over 5 years

Child Care Investment: Engaging Employers, Developing and Supporting the Child Care Workforce

Summary: Idaho is investing $30 million to match child care providers with businesses to develop partnerships for on-site, near-site, or dedicated child care seats for working parents.

Planned Evaluation: Yes

Why This Project

Lack of access to child care is a nationwide problem, costing families, businesses, and taxpayers an estimated $122 billion per year in lost earnings, productivity, and revenue. In 2019, the Bipartisan Policy Center reported that 74,670 children in Idaho potentially needed care while only 55,580 slots were available, creating a potential gap of 20,000 seats needed to get parents into the workforce.

The COVID-19 pandemic exacerbated the shortage of slots as providers closed and workers left the field. In Idaho, 349 providers closed, adding another 5,500 lost child care seats to the existing gap. This costs Idaho’s economy almost half a billion dollars per year, according to a report from the U.S. Chamber of Commerce.

The program’s primary goal was to increase child care seats statewide by approximately 1,000 by the end of 2024. In doing so, the Workforce Development Council (WDC) will support Idaho’s workforce and potentially strengthen labor participation in the state.

Investment Specifics

This project has the potential to grow high-quality child care capacity where it already exists and incentivizes employers to help build child care supply as a matter of workforce investment. Federal economic opportunity dollars may be increasingly awarded to entities showing strong community partnership including child care access, and this project creates a path forward.

Providers can apply for funds up to $15,000 per child served, but must also provide a 50 percent match or in-kind donation. An example of an in-kind donation might be discounted or free facility space from a partner organization.

Private, non profit, family/group, and employer based child care providers are all eligible to apply for expansion grants when in compliance with state and local licensing rules. The program aims to prioritize small providers (including $4 million set aside for providers with less than 12 seats), providers who practice evidence-based high-quality care, and providers of infant and toddler care.

Allowable uses for funds include acquiring or renovating facilities, buying necessary equipment and supplies, and staffing and operational costs. Applicants must submit a business plan and undergo a business risk assessment. Further, providers must stay in business for at least one year beyond the end of the grant period or risk repaying grant funds.

How They Did It

The Workforce Development Council will use $650,000 (2 percent) of the funds for administration of the grants over the life of the project as well as a nominal amount of general operating funds for startup costs. Because the grants were administered through the WDC’s existing grant portal, technical costs to stand up the project were minimal.

The WDC formed a Child Care Expansion grant committee, and once stood up, the committee and staff moved quickly. The WDC produced a white paper outlining the program need, a policy document clarifying project parameters and providing more detailed guidance, a scoring rubric showing how applications would be evaluated, and a project readiness checklist. The Child Care Expansion Grant committee met 29 times in the 16 month period between May 2022 and September 2023, using real time feedback from applicants to refine application procedures. Public meeting minutes demonstrate thoughtful commitment to reducing that burden and providing meaningful technical assistance to providers. For example, the WDC worked with smaller providers and the state’s Division of Financial Management to determine whether any grant funds could be used to assist small businesses with upfront costs.

Project Impact

The first round of funds have been distributed to 30 providers, representing 84 employer partnerships. The program has exceeded its initial goal to create 1,000 new child care slots by 187 percent, with a total of 2,869 new child care spaces for Idaho’s working families. Micron, a semiconductor manufacturer and the second largest employer in the state, broke ground on a new child care center that will support the workforce needed to ramp up production related to new investments the company is making in anticipation of federal grants and CHIPS and Science Act funds. The Children’s Center at Boise State University was awarded $390,000 to expand capacity to pre-pandemic levels while creating the first model for an employer subsidized, full inclusion preschool classroom in Idaho.