Financial ResourcesDownload Financial Resources
An overhaul of the early care and education system and vastly increased public investment in ECE are essential to ensure that the urgent needs of the early childhood workforce, children, and families are met during the crisis of the pandemic and beyond. Most ECE services are purchased in the marketplace by families. Publicly funded child care services are primarily designed for children in very low-income families and are under-resourced and oversubscribed. Before COVID-19, these conditions fueled a system that financially overburdened parents, yet still underfunded programs and, thus, kept the wages of teachers at poverty levels. Imagine if parents had to individually shoulder the cost of third grade for their child or if elementary school teachers’ wages were determined by what parents could afford. During COVID-19, the lack of adequate financial resources — coupled with the policy failures that have pushed parents to work — have compelled programs in many states to stay open even when staff feel unsafe or lack the equipment and supplies they need to operate as safely as possible. Many of these programs are unlikely to maintain services due to reduced enrollments coupled with increased costs to meet public health standards.
The expectation that an already overburdened child care system can meet the demands of an emergency situation without adequate support is impractical and irresponsible. The pandemic, while dire, nonetheless provides policymakers at federal and state levels with an opportunity to reimagine how ECE is funded, both in the short term and in the long term. Restoring the pre-pandemic system is not the answer to the decades-long child care crisis. A transformative vision and the financial resources to implement that vision are critical to building a system that delivers on the promise of early education for all children, their families, and the educators upon whom they rely. Small, ad hoc increases to public funding are not a solution to the chronic underfunding that characterizes the system as a whole.
The time is past due to overcome sticker shock about the costs of an appropriately funded early care and education system that is effective and equitable for children, their families, and early educators. Setting a price for comprehensive ECE systems across states must reflect the resources necessary to support educators to achieve higher levels of both entry and advanced qualifications, provide work environments that support effective teacher practice and protect their well-being, and ensure predictable and appropriate increases in compensation that are sufficient to attract and retain skilled educators. The failure to do so not only costs our economy billions of dollars every year in lost household income as parents are forced to leave the paid labor force or reduce their work hours, but also prevents the United States from realizing the immediate and long-term benefits of a transformed system.1Gould, E., & Blair, H. (2020). Who’s Paying Now? The Explicit and Implicit Costs of the Current Early Care and Education System. Berkeley, CA: Center for the Study of Child Care Employment, University of California, Berkeley. Retrieved from https://cscce.berkeley.edu/whos-paying-now-the-explicit-and-implicit-costs-of-the-current-early-care-and-education-system/. Such benefits range from the monetary (increased tax revenue) to the moral (greater gender and racial equity in the workplace).
States must take on the charge of systems reform — in coordination with the federal government as appropriate. A crucial step is for states to engage in a cost-modeling exercise and develop a multi-year plan for implementation. For example, the District of Columbia conducted a cost estimation model in order to inform reimbursement rates for subsidized child care programs,2Office of the State Superintendent of Education (2018). Modeling the Cost of Child care in the District of Columbia 2018. Washington, DC: Office of the State Superintendent of Education. Retrieved from https://osse.dc.gov/publication/modeling-cost-child-care-district-columbia-2018. rather than rely on market rates, which is known to be a flawed method for understanding the true cost of high-quality early care and education.3Stoney, L. (2020). Rate Setting in Reality: Moving Beyond the Myth of Market-Based Pricing. Opportunities Exchange. Retrieved from https://opportunities-exchange.org/wp-content/uploads/OpEx_2020_RateSetting_IssueBrf.pdf; Bipartisan Policy Center (2020). The Limitations of Using Market Rates for Setting Child Care Subsidy Rates. Washington, DC: Bipartisan Policy Center. Retrieved from https://bipartisanpolicy.org/wp-content/uploads/2020/06/Limitations_of_Market_Rate_Surveys_for_Child_Care_Brief_FINAL1.pdf. It is critical that such cost modeling exercises include assumptions that reflect appropriate conditions for the workforce, particularly in terms of qualifications, compensation, and adequate staffing levels and supports.4Austin, L.J.E., Whitebook, M., & Dichter, H. (2019). Financing Early Educator Teacher Quality: A Closer Look at Assumptions That Drive Variations in Estimating the Cost of Services. Berkeley, CA: Center for the Study of Child Care Employment, University of California, Berkeley. Retrieved from https://cscce.berkeley.edu/financing-early-educator-teacher-quality/. The estimates developed by CSCCE and the Economic Policy Institute (EPI) are a good starting point to understand likely costs at the state level (see Table 3.17).
Ultimately, even though federal funding continues to be an important source of resources for early care and education, state policymakers have considerable leeway — and thus, responsibility — to prioritize ECE in their own state budgets.
Simultaneously, there are existing opportunities for states to devote additional funding to ECE as a down payment toward the level of funding that will ultimately be required. State-funded pre-K has been a primary means of dedicated state ECE spending over the past several decades,5Friedman-Krauss, A.H., Barnett, W.S., Garver, K.A., Hodges, K.S., Weisenfeld, G.G., & Gardiner, B.A. (2020). The State of Preschool 2019. New Brunswick, NJ: National Institute for Early Education Research. Retrieved from http://nieer.org/state-preschool-yearbooks/2019-2. but states can also contribute resources in other ways, such as additional spending on child care services. Ultimately, even though federal funding continues to be an important source of resources for early care and education, state policymakers have considerable leeway — and thus, responsibility — to prioritize ECE in their own state budgets. Future editions of the Index may include additional or new state efforts to move toward a publicly funded system of ECE for all children age 0-5, but in the interim, the 2020 Index continues to track whether states are, at a minimum, devoting additional state funding above and beyond what is required to receive federal funding for ECE.
“We deserve some support. Frog Hollow and other family child care centers have cared for our community for decades, but our community has not cared for us in our time of need.”California6Dressman, E. (2020). “My child care business needs state support now to survive the pandemic.” Oakland, CA: EdSource Highlighting Strategies for Student Success. Retrieved from https://edsource.org/2020/my-child-care-business-needs-state-support-now-to-survive-the-pandemic/639568.
Overview of State Progress on Financial Resources
- Stalled: 28 states
- Edging Forward: 21 states
- Making Headway: 2 states
Between 2018 and 2020, seven states improved their assessment by meeting one or both of the key financial resources indicators:
- Nebraska made the greatest shift by moving from stalled to making headway by meeting both indicators.
- Tennessee improved from edging forward to making headway, also meeting both indicators.
- California, the District of Columbia, Louisiana, Maryland, Michigan, and Montana advanced from stalled to edging forward.
However, seven other states moved down in their assessment by meeting one or none of the indicators:
- Alaska, Connecticut, Indiana, Maine, New Hampshire, and Wyoming moved from edging forward to stalled , no longer meeting either of the financial resources indicators.
- Washington shifted from making headway to edging forward for meeting only one of the indicators (the ratio of pre-K spending to K-12 spending decreased).
Overall, approximately one-half of states remain in the stalled category, meeting neither of the key indicators for state financial support of ECE, while only two are making headway.
Key to State Progress on Financial Resources
|Financial Resources||Values||Maximum Point|
|State reports extra Child Care Development Fund (CCDF) spending?||Yes/No||6|
|Pre-K per-child spending as % of K-12: Greater than 50%?||Yes/No||6|
|0-4 points per category||Stalled|
|5-8 points per category||Edging Forward|
|9-12 points per category||Making Headway|
Map of State Progress on Financial Resources, 2020
State Progress on Financial Resources, 2018 & 2020
State Progress on Financial Resources per Indicator, 2018 & 2020
State Progress on Financial Resources: Indicators
Indicator 1: Did the state report extra Child Care Development Fund (CCDF) spending?
Rationale: The Child Care Development Fund (CCDF), authorized by the Child Care and Development Block Grant (CCDBG), is a core source of federal funding for early care and education services and for initiatives pertaining to the ECE workforce. Despite recent increases, CCDF funding remains far below what is needed to achieve high-quality ECE services.7Hardy, A. (2020). Child Care Assistance and Participation in 2018. Washington, DC: Center for Law and Social Policy. Retrieved from https://www.clasp.org/sites/default/files/publications/2020/09/2020_Child%20Care%20Assistance%20and%20Participation%202018.pdf. In order to receive all federal CCDF funds, states must spend a set match amount and meet Maintenance of Effort (MOE) requirements. We focus on whether states spent over and above the minimum requirement for matching or MOE funds for at least one of the preceding three fiscal years for which data are available (2016-2018), using CCDF expenditure data from the Center for Law and Social Policy (CLASP).8Personal communication with Katherine Gallagher Robbins and Stephanie Schmit, Center for Law and Social Policy, July 2020. Because states are not required to report whether they spend above the minimum required, the totals given here may be an underestimate.
Current Status Across States: A total of eight states (Colorado, Georgia, Louisiana, Nebraska, Ohio, Tennessee, Vermont, Washington) reported extra CCDF spending for ECE beyond what is required to receive federal funds during at least one of the years in the period 2016-2018.
Change Over Time: The number of states that met this criteria decreased by one state since 2018. Specifically, Louisiana, Nebraska, and Tennessee reported additional CCDF spending and joined the states that met this criteria. Alaska, Connecticut, New Hampshire, and Wyoming no longer met the criteria because they did not report additional spending for any year during 2016-2018.
Indicator 2: Is pre-K per-child spending more than 50 percent of per-child K-12 spending?
Rationale: Of all the areas of ECE, publicly funded pre-K has come the closest to being accepted as education and a public good for all children. Nonetheless, funding per child on pre-K is still lower than funding for older children.
Current Status Across States: Seventeen states spend at least half as much per child on public pre-K compared to per-child spending on public K-12 education. However, in some cases this may be due to low spending on K-12 rather than high spending on pre-K: ten of these 17 states fall below the median per-child spending on K-12 across all states ($13,730).
Change Over Time: Since 2018, there was a net increase in states devoting more than half of what they spend on K-12 to public pre-K.
- Eleven states maintained a ratio of at least 50-percent pre-K to K-12 spending and continued to meet this criteria for 2020.
- Five states (California, Maryland, Michigan, Montana, Nebraska) and the District of Columbia increased their ratio of pre-K funding and now meet the criteria for this indicator in 2020.
- On the other hand, three states (Indiana, Maine, and Washington) dipped below the threshold for this indicator.