California children need a safe space to learn and grow while parents are at work, and the COVID-19 pandemic underscored just how essential child care is for the livelihood of workers and communities. California’s subsidized child care and development system has long been critical to the state’s economic infrastructure, helping families struggling to make ends meet cover the high cost of early care and education for their children.1Families are eligible for subsidized child care if the child who would receive care is under the age of 13; the family establishes an appropriate eligibility status, such as by having an income below the limit set by the state; and the family demonstrates a need for care, such as parental employment. Families generally must meet the same income guidelines applicable to child care to qualify for the California State Preschool Program, which is funded solely with state dollars. State law, however, allows up to 10% of families in the state preschool program to have incomes up to 15% above the income eligibility limit, but only after all other eligible children have been enrolled. The California State Preschool Program is a part-day program offered for roughly nine months of the year. Some children receive “wraparound” services that provide subsidized child care for the remainder of the day and throughout the entire year. To be eligible for the full-day California State Preschool Program, families generally must meet the same eligibility guidelines that are applicable to subsidized child care. But policymakers have never provided enough funding to offer care for all eligible families or to ensure providers and early educators are paid fair and just wages.2Kristin Schumacher, Exploring the Unmet Need for Subsidized Child Care and Development Programs in California (California Budget & Policy Center, February 2019), https://calbudgetcenter.org/resources/exploring-the-unmet-need-for-subsidized-child-care-and-development-programs-in-california/; and Kristin Schumacher and Erik Saucedo, California’s Subsidized Child Care Providers Are Overdue for a Pay Raise (California Budget & Policy Center, April 2022), https://calbudgetcenter.org/resources/californias-subsidized-child-care-providers-are-overdue-for-pay-raise/
State and federal dollars fund the state’s subsidized child care and development system that includes both child care programs and the California State Preschool Program. Due to chronic underfunding at the state and federal level, cash-strapped families and under-paid providers engaged in the state’s subsidized child care and development system did not have the resources to withstand the economic shock of the pandemic. This 5 Facts provides key details on how state and federal funding mitigated some of the impacts of the pandemic on California’s subsidized child care and development system and explains why policymakers should continue to invest ongoing resources in California’s families and providers.
1. Federal Policymakers Provided Significant One-Time Support for Child Care Providers and Families During the Pandemic
California has received more than $5 billion in federal relief funds during the pandemic to support under-paid child care providers and cash-strapped families who were not in a position to weather a health and economic crisis.3Federal policymakers also provided pandemic relief funding for Head Start, a federal early care and education program. These relief dollars flowed directly to Head Start providers across California and were not appropriated in the state budget. See US Department of Health and Human Services, Office of Head Start, Program Instruction ACF-PI-HS-21-03 (May 4, 2021), https://eclkc.ohs.acf.hhs.gov/policy/pi/acf-pi-hs-21-03. These one-time relief dollars were on top of the state’s annual appropriation from the Child Care and Development Fund (CCDF) — the primary source of federal funding for subsidized child care.
The first round of federal pandemic relief for child care came from the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020.4California Budget & Policy Center, Federal Fiscal Relief and COVID-19: Implications for Californians (April 2020), https://calbudgetcenter.org/resources/covid19-federal-fiscal-relief-california/. California received $350 million, increasing federal funding for child care in California by 51% in the 2020 federal fiscal year over pre-pandemic levels.5State policymakers supplemented the CARES Act funding for child care with an additional $110 million in flexible CARES Act dollars allocated to states from the Coronavirus Relief Fund. See Department of Finance, Notification letter Section 11.90 – Child Care and Food Bank Support (October 19, 2020), https://dof.ca.gov/wp-content/uploads/budget/covid-19/covid-19-allocations/10-19-20_section_11-90-federal_coronavirus_relief_funds-child_care_and_food_bank_support-cc.pdf.
Federal policymakers provided additional child care relief in the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) in December 2020, of which California received an additional $964 million. Finally, the American Rescue Plan Act (ARPA) became law in March 2021, providing a total of $3.7 billion for child care relief efforts in California — 62% for provider stabilization and 38% to supplement CCDF funding.6California Budget & Policy Center, American Rescue Plan Provides Assistance to Millions of Californians (March 2021), https://calbudgetcenter.org/resources/american-rescue-plan-provides-assistance-to-millions-of-californians/. Combined, CRRSA and ARPA provided a total of $4.7 billion in child care relief funds to California in the 2021 federal fiscal year. This was a six-fold increase in federal child care dollars over pre-pandemic funding from the Child Care and Development Fund.
2. State Policymakers Have Utilized Roughly Half of Federal COVID-19 Child Care Relief Funds
Federal child care relief funding has been significant and essential to support child care providers and working parents. To date, state leaders have appropriated 48% — roughly $2.5 billion — of the federal funds to keep the underfunded subsidized child care and development system afloat.
More than one-third of the appropriated relief funds, or $891 million, has been used to support California families. Policymakers have utilized relief funding to provide emergency child care for essential workers and to expand subsidized child care spaces for families with low incomes. Policymakers also have waived family fees for subsidized care for a limited time to ease families’ financial burdens.7See Kristin Schumacher, Erik Saucedo, and Marcela Salvador, California Families Pay High Price for Subsidized Child Care (California Budget & Policy Center, March 2021), https://calbudgetcenter.org/resources/california-families-pay-high-price-for-subsidized-child-care/.
Nearly two-thirds of the appropriated federal relief funds — $1.6 billion — has been allocated to support child care and preschool providers. Relief measures have included provider stipends for both subsidized and non-subsidized providers, rate increases and rate supplements to compensate for chronically low payment rates, pandemic supports to ease the cost of keeping doors open during the pandemic, and other investments in quality and support programs.
The administration has struggled to distribute the large amount of federal relief funds in a timely fashion, and some measures, such as waiving family fees for working parents and provider pandemic supports, will end on June 30, 2022, increasing economic hardship. More than half of the federal relief dollars remain unallocated.
3. Remaining One-Time Federal Relief Funds to Boost Provider Payment Rates and Provide Care for More Children
Roughly half of the $5.2 billion in one-time federal COVID-19 child care relief dollars remain unspent. The $2.7 billion in unspent funds includes both CRRSA and ARPA dollars — both of which can be used for a variety of purposes to supplement existing child care funding in California.8US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 (April 14, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-discretionary-funds-appropriated-crrsa-act-public-law-116-260-signed-law; US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-2 (May 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-02; and US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3 (June 10, 2021), https://www.acf.hhs.gov/occ/policy-guidance/ccdf-acf-im-2021-03.
The majority of unspent federal relief funding is ARPA dollars — both the stabilization funds and supplemental CCDF funds. Policymakers have signaled the intent to use these one-time ARPA dollars for provider payment rates through the 2023-24 state fiscal year and for subsidized child care spaces through the 2024-25 state fiscal year.9Assembly Bill 131 (Committee on Budget, Chapter 116, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB131; and Senate Bill 129 (Skinner, Chapter 69, Statutes of 2021), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB129. State leaders have also indicated that the remaining $326 million in CRRSA will fund additional subsidized child care spaces in 2022-23 state fiscal year.10Assembly Bill 131 (Committee on Budget). The use of these federal child care relief funds in 2022-23 and beyond is not final until the governor signs the budget agreement for the fiscal year.
The federal administration signaled urgency in utilizing child care relief funds for temporary measures to support cash-strapped families and under-paid subsidized providers who have faced enormous challenges during the pandemic. The CRRSA dollars and ARPA Stabilization funds must be spent by September 30, 2023.11US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-1 and Information Memorandum CCDF-ACF-IM-2021-2. ARPA supplemental CCDF funds must be spent by September 30, 2024.12US Department of Health and Human Services, Office of Child Care, Information Memorandum CCDF-ACF-IM-2021-3.
More in this series
See our Report: California’s Subsidized Child Care Providers Are Overdue for Pay Raise to learn how California providers and families suffer when subsidized child care is limited in their communities because of policymakers’ lack of investment.
4. Policymakers Have Expanded the Subsidized Child Care and Development System With One-Time Funds
Funding for the state’s subsidized child care and development system increased dramatically in the 2021-22 state fiscal year due in large part to one-time federal relief funds. In 2021-22, total funding for subsidized child care programs and the California State Preschool Program was $6.9 billion, but $2 billion of this total was one-time funding — 29% of overall support.
These one-time dollars are both federal relief funds and state funds, and have been used to support children, families, and providers in a number of ways, including payment rate increases and additional child care and preschool spaces for children. Policymakers plan to use remaining one-time federal relief funds to maintain these program expansions in coming years.13Assembly Bill 131 (Committee on Budget). Eventually, the state will have to commit significant, ongoing state dollars to avoid cuts to these vital supports for families and providers, but this will be difficult if policymakers face budget challenges.
Using one-time dollars to boost funding for the subsidized child care and development system is not unique to the pandemic. Since Governor Newsom took office, the state has increasingly relied on one-time dollars to support child care and preschool program expansions. Using one-time funding for ongoing programs and services undermines the fiscal foundation of the state’s subsidized child care and development system.
5. The 2021-22 Budget Builds on Investments from Prior Years but Still Falls Short of Equitable Funding Levels
Policymakers have incrementally invested in the state’s subsidized child care and development system to restore the devastating cuts made to child care programs and the California State Preschool Program as a result of the Great Recession — the state’s last economic crisis.14Kristin Schumacher, One-time Funding Boosts Dollars for Child Care and Preschool (California Budget & Policy Center, September 2018), https://calbudgetcenter.org/resources/one-time-funding-boosts-dollars-for-child-care-and-preschool/. State leaders continued this investment trend in the 2021-22 budget by utilizing one-time federal relief dollars and one-time and ongoing state funds to dramatically increase support for the state’s subsidized child care and development system.
Total funding for subsidized child care and the California State Preschool Program increased by more than one-third in 2021-22 (after adjusting for inflation), bringing overall funding to $6.9 billion. This boost in funding was driven by roughly $1.7 billion in one-time federal relief dollars included in the 2021-22 state budget. State policymakers also increased General Fund support for the subsidized child care and development system by 31% and special fund support by 59%. However, even with increased funding, resources still fall far short of the billions in additional support necessary to provide fair and just wages to providers and to increase access to early learning and care for families with low and moderate incomes in California.15California Health & Human Services Agency, Master Plan for Early Learning and Care: Making California for All Kids (December 2020), 95-107, https://www.chhs.ca.gov/home/master-plan-for-early-learning-and-care/.
The COVID-19 pandemic has underscored just how vital child care is to children, families, communities, and the economy. In response to the crisis, California policymakers have invested state and federal dollars into the state’s chronically underfunded subsidized child care and development system to mitigate some of the devastating impacts of the pandemic. While total funding for subsidized child care and the California State Preschool Program increased dramatically, the use of one-time funds to expand these programs threatens the fiscal foundation of the system and California families’ and providers’ ability to sustain child care.
As the state and nation emerges from the pandemic, policymakers have the opportunity to use one-time federal pandemic relief funds as a down payment for a fiscally sound subsidized child care and development system. To do so, both the state and federal government must provide significant, ongoing resources. This will ensure that children have a safe place to learn and grow, working parents have access to affordable child care, and providers and early educators are paid fair and just rates.