How Congress Can Combat Child Care Inflation
Child care costs have risen by 41% since 2019, a problem that the Build Back Better plan would have worsened.
West Virginia Senator Joe Manchin’s decision to oppose Congressional Democrats’ Build Back Better will give lawmakers an opportunity to rethink their approach to reforming the nation’s social welfare systems–including the nation’s preschool and childcare programs. The Build Back Better plan would have exacerbated the problem of rising child care costs and disrupted current child care arrangements by unnecessarily increasing the regulation of providers.
As Congress considers future child care reforms, a new Department of Defense pilot program to subsidize in-home care provides a model for expanding access to affordable and high-quality childcare.
In 2022 and beyond, lawmakers should focus aid on helping low-income families pay for high-quality child care services for their children, rather than subsidizing middle- and upper-income families. Specifically, Congress should reform the Head Start program to provide subsidies directly to families through Head Start Accounts. Moreover, Congress should leverage the Child Care Development Fund program which provides low-income families with broad choices over how to use child care subsidies to find the right setting for their children.
The new military pilot project to fund in-home child care
On Monday, President Joe Biden signed into law the FY2022 National Defense Authorization Act, which includes language authorizing a Department of Defense pilot project to provide financial assistance for in-home child care for the children of military personnel.
In June, the Pentagon announced the initiative:
The new pilot program will explore fee assistance for military families who have determined that full-time, in-home child care, such as nannies, is the best solution to fit their needs. The program will cover full-time care for a minimum of 30 hours to a maximum of 60 hours of child care weekly. Care is not limited to Monday through Friday or time of day. This allows in-home providers to be used for rotating shifts and weekend care to meet the nontraditional schedules of military families.
The Department of Defense manages “the largest employer-sponsored child care program” in the nation. The pilot program expands the DOD’s existing options, which include “child development centers, certified family child care homes, and before- and after-school care program,” as well as “fee assistance for community-based child care and free access to a subscription service that connects families with flexible, hourly care.”
DOD launched the new pilot program in five areas with high-demand and long-wait list for DOD-funded childcare centers: Hawaii, the national capital region, Norfolk, San Antonio, and San Diego. The rules require that care-providers must meet basic guidelines (be an adult, speak English, and have a high school degree), pass a background check, and take 32 hours of basic instruction.
Besides these limited rules and regulations, the DOD’s new child care program puts parents in charge of finding the right child care provider for their children. This approach should be a model for Congress and the Biden administration as they consider reforming federal child care programs.
Build Back Better would have disrupted the child care sector
For example, the Build Back Better program would have dramatically increased federal spending on child care by establishing a “Birth Through Three Child Care and Early Learning Entitlement,” which would have cost $273 billion over ten years according to the Congressional Budget Office. The program would have created new subsidies for lower- and middle-income families with eligibility phased-in over a three year period. By year three, children living in families with 150% of the state median income, which means that many families with earnings above $100,000 per year would be eligible for subsidies. The plan would have established new subsidies for “child care certificates” that would allow parents to purchase child care services; however, the program would have created new eligibility requirements on child care providers.
AEI resident scholar Rick Hess warns that the Build Back Better approach has the potential to “decimate” the current child care market. Writing in Ed Week, Hess explains:
“For starters, the new program would likely change which child-care centers are eligible for federal support. While faith-based child-care providers are currently eligible to receive government funding, the House version of Build Back Better includes rules that would cut faith-based providers out of the picture. And that’s a big deal, given that, of the families who use center-based child care, 53 percent use one affiliated with a faith-based provider.”
In other words, had Build Back Better become law, the federal government would have been subsidizing free or low-cost child care from federally-approved providers, and forcing religious-organizations that had been providing care to compete with free alternatives. As a result, the likely outcome would have been many parents changing child care options, resulting in potential closures of faith-based providers and shortages at approved child care centers.
This disruption would have created significant challenges for families to find suitable and affordable child care options. As Vox’s Andrew Prokop argues, the program could ‘be a big mess”:
“If the supply of providers can’t keep up with this new demand, that’s a recipe for shortages or price hikes. Shortages would bedevil everyone. But price hikes would be a particular problem for middle- and upper-middle-class families. That’s because, the way the plan’s phase-in is designed, those families wouldn’t be eligible for subsidies just yet — and many won’t be until 2025. They’d have to pay any higher costs themselves, and could see their current child care arrangements thrown into chaos as changes ripple through the sector.”
Many parents are already struggling to find affordable child care options for their children, due to pandemic-related closures and prices that have risen by 41% since 2019. If many parents were given the incentive to switch their children from faith-based providers to government-subsidized centers, there would surely have been supply disruptions and shortages.
Congress should expand low-income families’ options
With Build Back Better now tabled, lawmakers have an opportunity to reconsider policy options to improve access, affordability, and quality for low-income families. The Department of Defense’s innovative in-home care pilot project should be a model for future reforms.
Rather than narrowing access by regulating the child care sector, policymakers should structure government benefits in a way that expands supply while maintaining quality by trusting parents and requiring basic guidelines for would-be providers. Congress can do this by reforming and leveraging existing child care subsidy programs.
Reforming Head Start to improve its value by giving parents choices
For example, Congress could apply this reform approach to Head Start (which spends more than $10,000 per child but requires providers to only offer 448 hours of care per year). Past national evaluations have found that Head Start provides little or no lasting educational benefit for participating children. Based on the simple metric of the hours of care provided, Head Start provides limited value as a child care program.
For example, in 2019, FREOPP compared the per-child cost of Head Start by state with the average cost of full-time child care:
“In 37 states, the per-child cost of the Head Start program is more than the average cost of full-time child care for a 4-year-old. Moreover, state-operated public preschool programs provide more hours of care at a lower per-child cost than Head Start in more than a dozen states. For a working parent, increasing the number of hours of free child care provided through Head Start from 448 hours to 1,020 would provide 572 additional hours of care. This is enough child care to allow a parent to work the equivalent of 14 extra weeks per year.”
At the time, we found that allowing parents to work these extra hours per year could increase their earnings by more than $4,200, or by 20 percent, assuming they were earning the minimum wage.
Congress has not reauthorized the Head Start program since 2007. In 2022, lawmakers should conduct oversight over the program and modernize it to give families greater choice about how to use their funds to obtain child care or preschool services for their children. Under the current program rules, the Department of Health and Human Services provides funds to local grantees:
“Programs are run by about 1,600 public and private nonprofit and for-profit grantees. The grantees must comply with detailed federal performance standards.”
Nonpartisan oversight has revealed significant problems, including fraud and improper payment risks, as well as the HHS Department’s failure to ensure that Head Start centers provided safe drinking water.
Giving families greater choice about how to use their children’s share of Head Start funding could significantly increase the number of hours of care provided and give parents the responsibility to decide whether the child care provider was offering high-quality services. For example, Congress could reform the program to provide Head Start accounts directly to low-income parents, rather than providing funding to grantees. Based on the HHS Department’s most recent estimate for Head Start funding and enrollment, the existing program could be restructured to provide low-income children with Head Start accounts worth as much as $10,000 per year.
Leveraging the Child Care Development Fund to broaden parental choice
Another way to expand access to child care for low-income families would be to increase funding for the Child Care Development Fund (CCDF). According to the HHS Department, the CCDF program, which currently serves 1.4 million low-income children, “emphasizes parental choice,” and allows children to be “cared for in a wide variety of settings.” As of 2019, 75 percent of children receiving subsidies attend a child care center, 20 percent were in a family child care home setting, and 2 percent received care in their own home. Importantly, the CCDF program focuses on providing child care subsidies to low-income families. As of 2019, 40 percent of benefiting families lived below the federal poverty level.
Future efforts to expand access to child care for working families could simply expand the CCDF program to allow more children to benefit. This would make more sense than creating a new child care entitlement while regulating many of the child care providers out of existence.
Moreover, Congress should also require the HHS Department to take steps to improve its oversight of the CCDF program, which has been found to be susceptible to improper payments and other program integrity risks. Improving oversight of the CCDF program would ensure that taxpayer funds are used appropriately to benefit disadvantaged children.
Building on what works
Congressional Democrats’ plan in the Build Back Better act to create a new child care entitlement program for American parents, including those with middle- and upper-incomes, would have created significant challenges for the child care sector. Specifically, broadly subsidizing child care for the majority of American families while increasing regulation of child care providers would have disrupted many families’ current child care arrangements and raised the costs at eligible child care centers.
Rather than regulating the child care sector and subsidizing middle- and upper-income families, Congress should expand and improve child care options for low-income parents. The Department of Defense’s new pilot program to subsidize in-home child care arrangements highlights how many families would benefit from expanded child care options. In 2022 and beyond, Congress should reform the Head Start program to give families more choices and leverage the Child Care Development Fund when considering future programs to increase federal child care benefits.
