NC lawmakers look for solutions to avoid looming child care funding crisis

One thing the coronavirus pandemic showed is how crucial the child care sector is to the overall economy of the state.

Health care workers, grocery store clerks, food processing workers, sanitation crews and many others needed a safe place for their young children as they helped keep essential services running. 

Today, nearly 221,000 children younger than 5 in North Carolina spend part of their day in child care programs — whether that’s in pre-k classes or a caregiver’s home — while their parents and providers go to work.

As essential as those services are, those care centers are staring at a fiscal cliff as extra federal funding that flowed to them during and immediately after the pandemic is about to end.

That prospect led to a dire forecast from state health officials on Tuesday during a legislative committee meeting.

Typically, federal support for child care to North Carolina runs at about $400 million a year, but that grew to about $1.3 billion a year as a result of the American Rescue Plan Act, explained Ariel Ford, who runs the Division of Child Development and Early Education for the state Department of Health and Human Services. 

That money has allowed facilities to stay open and operating through the pandemic and beyond. According to state data, 97% of eligible facilities received stabilization grants. 

That funding will expire in July, unless congressional or legislative action is taken.

“We're at a moment of truth: Here we are, we knew this was coming,” Ford told members of the Joint Legislative Oversight committee on Health and Human Services. “At the end of this fiscal year, halfway through the year, just five months away, we are going to be over the edge of this billion-dollar cliff.”

State lawmakers are hoping that federal officials come through with some money, but, given the gridlock in Washington, it’s likely that much of the burden of keeping child care facilities running will fall on the state. What’s needed is a plan. 

Business priority

Ford told lawmakers that a group of business executives who call themselves Ready Nation calculated that North Carolina loses about $3.5 billion in revenue and productivity every year due to child care access problems. 

Workers say child care costs can take a huge bite out of their family budget.

Child care centers say they struggle to hire and keep workers because they can’t afford to pay them living wages without state and federal subsidies.

That’s echoed in findings from the North Carolina Chamber of Commerce. Last spring, the business group published a report showing that child care issues make it difficult for businesses to hire employees and grow. That study found that:

• -A quarter of families with children younger than 5 said they left the workforce because they couldn’t find affordable child care.
• -Close to two-thirds (60%) of parents with preschool-aged children said they had to miss work because of child care issues.
• -More than a third (37%) of parents of children younger than 5 said they turned down jobs, promotions or job changes because it would increase child care expenses.
• -A third (32%) of parents of children younger than 5 turned down training or education opportunities because of lack of affordable child care. 

The chamber found that across the political spectrum, majorities of people wanted the state to increase funding to make affordable child care more accessible to workers. 

“What we know about North Carolina is, while we invested decades ago, we have not continued to increase those investments — those state dollars in our child care system, in our pre-k system,” Ford said. 

More pay at Starbucks

State statistics show that, on average, North Carolina families pay $790 a month, or $9,480 a year for care for an infant, more than the cost of in-state tuition at public college in the state. 

Care for an infant and an older sibling costs on average more than $17,000. 

“Child care is one of the most expensive parts of a family's budget,” Ford said. “This is at a time where they are earliest in their careers … they're just starting out, and they don't have those 18 or 20 years to build up, like you do for a college fund.”

“My husband and I paid $2,500 in child care just 10 years ago, for our two children,” Sen. Sydney Batch (D-Raleigh) said. “It was more than our mortgage. We didn't save in our 401(k)s and our retirement because we wanted our children to get the best early education.”

Sen. Benton Sawrey (R-Clayton), who said he has two young children, commiserated with what Batch had to say. He also asked whether there might be child care deserts in places like Johnston County, where his constituency is. 

Ford said rural areas often have greater challenges getting child care centers up and running. Initial costs are the same — or more — but there’s often fewer workers to choose from, and transportation can be an issue. 

Even with the high price tag for care, state statistics show that the median wage for a child care worker in North Carolina is $14 an hour. Pay can range from $9 an hour for assistants to $18 or $19 an hour for more experienced teachers. 

That’s often less than what workers at Starbucks, Target or Costco make.

“Most of those places have health insurance, et cetera, whereas about 50% of our child care centers and homes do not have employer-sponsored health insurance,” Ford said. 

One benefit some child care workers might have access to now that they didn’t before December, Ford pointed out, is Medicaid. Lawmakers approved expansion of the health care benefit last year to more low-wage workers.

Even though worker salaries are low, child care centers have hefty costs because caring for infants and toddlers can require more employees to meet care requirements, Ford said.

“There's only so many bottles that one person can feed and only so many diapers one person can change … in an hour,” she said. “If you have 18 3-year-olds in a classroom, to take care of them and educate them and make sure that they are safe and well cared for takes a lot of human beings.”

Many of those facilities also open early and stay open late to accommodate parents’ schedules. 

“The reason that those child care centers and homes can't raise their prices anymore is that they're already charging as much as our families can pay,” Ford said. 

Brainstorming for solutions

Last year, the General Assembly allocated $20 million to Ford’s division for pilot programs to expand access to child care in low-income communities and low-performing school districts. That made it possible to award subsidies to 200 applicants, she said, but there were 3,000 applications for that pool of money. 

Ford offered options for the lawmakers to consider, including looking to what other states have done.

Georgia, she pointed out, has made universal pre-K a legislative and funding priority. 

In Kentucky, preschool teachers can get free child care as a workforce enhancement. That program reduced vacancies in child care programs so that more classrooms were open, allowing for more parents to have access. 

“But I would not say that any state has it all figured out,” Ford added. 

There are financial considerations too.

Ford said about 65,000 families receive child care subsidies. That number could go up. The waitlist of more than 20,000 that existed before the pandemic has been whittled down to only about 3,000, but with the funding cliff, she expected that to rise again.  

Ford also suggested simplifying the rates for subsidies. 

Congress could act, too, but election year politics could have an impact. 

“My hope would be that they would come up with a bipartisan plan,” Ford said. 

That might be after the elections, she added.

“Every state in the country is headed for this same cliff, so we're in good company. All 50 states, all territories and all tribes are headed over this cliff together,” Ford said. “My hope is that [Congress comes] back and they are ready to help make sure that the country's economy stays strong by making sure that people can stay in work.”

This article first appeared on North Carolina Health News and is republished here under a Creative Commons license.