BBB Specifics: Child Care

Last week, President Biden and Congress unveiled the latest version of the federal recovery package, coined the Build Back Better plan. This package represents a significant investment in Montana communities, geared toward expanding economic opportunity and lowering costs for families and workers. Historic investments in child care, preschool, school nutrition, and the child tax credit will help lift millions of children from poverty. Over the next week, Montana Budget & Policy Center will provide information on key components of this package.

Child Care

The federal economic recovery package provides $400 billion in additional support for child care and early childhood education for families and workers. In child care funding alone, Montana is slated to receive $67 million in 2022, $95 million in 2023, and $118 million in 2024, to expand access to child care and build out child care capacity.

Why is this investment necessary? Our current child care system is failing Montana families, and our economy is suffering as a result. Even before the pandemic, licensed child care slots in Montana covered less than half of the children whose parents work and need child care. This situation is more dire for parents of infants – with licensed child care capacity filling roughly a third of the need. A family lucky enough to find a slot will pay, on average, nearly 20 percent of their family income for care.

Who would benefit from the child care funding? Families, businesses, and child workers are all set to benefit from this package. Once the program is phased in over three years, parents of nearly 85 percent of Montana children under 6 will access support and see their costs go down. That’s about 63,000 children in the state. Montana businesses across the state are facing workforce shortages, in part due to lack of reliable child care for their workers. This investment will help keep parents in the workforce and is critical for our economy.

Who will be eligible for child care?The program is phased in over three years, expanding family eligibility over time. In the first year, families with incomes at or below the state median income will be eligible for assistance (for a family of three in Montana, that is roughly $71,000). Over three years, states will expand their programs to make more families eligible, with the program ultimately helping all families at or below 250 percent of the state median income (or about $180,000 for a family of three).

In general, a child must have at least one parent who is working, in school, or participating in other eligible activities. There are exceptions to ensure that children who have a disability, are in foster care, are experiencing homelessness, or are cared for by an older family member can receive assistance.

How will this package help families afford child care? States can require families to pay copays, but copays are capped based on income and cannot exceed a certain percent of family income. Families living on lower incomes (below 75 percent of the state median income) are not subject to copays. For families at higher income levels, copays are capped at 7 percent of income. An average Montana family with copays capped at 5 percent will save $116 per week, or $6,032 annually, on child care costs.

How will this bill help child care professionals? Today, child care professionals are underpaid and overworked, facing wages barely above minimum wage. The legacy of employer discrimination, racism, and perceptions of caregiving responsibilities have resulted in women, and specifically women of color, overrepresented in child care work and often paid poverty wages. To receive funding, states must show a plan to ensure child care professionals are paid a living wage and competitive with wages of elementary education professionals. By investing billions in child care, this package makes it possible for child care small businesses to pay wages that will stabilize their workforce and ensure child care professionals are paid for their work.

Will this package help states expand the supply of child care? The bill is geared toward helping states increase the supply and capacity of child care providers over the first three years, so that more families can access child care. The package provides additional support for states to expand payments to child care businesses, as well as grants to grow child care supply and improve quality.

Will the state have to provide additional state funding for the program? There is no state match for the first three years, and after that, the federal government will provide 90 percent of the cost, with states matching 10 percent. For the first three years, funds allocated to states are designed to help build additional child care capacity and increase access to child care for families. During those first three years, states must allocate 50 percent of their funds toward expanding access to subsidies, 25 percent to support building child care supply and improving quality, and 25 percent toward expanding outreach and access to those subsidies (including the state’s capacity to do that work). Starting in 2024, the program will guarantee affordable child care for eligible families, similar to how Medicaid and other social safety net programs operate. The federal government will pay 90 percent of the cost, and states are required to meet a 10 percent match (states and the feds share administrative costs, 50/50). This state match level is lower than most federal programs, including the match levels for traditional Medicaid and federal highway funds, and is on par with the state match for Medicaid expansion.

What if a state refuses to take the additional federal investment? If a state chooses not to participate, the bill will allow local governments or Head Start agencies to apply and receive funds. The federal Department of Health and Human Services will administer the program and provide additional details by rule on how local governments could apply in the event a state chooses not to take the funds.

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