Childcare providers are struggling to plan for the future as federal funding runs dry

• Many parents need reliable childcare so they can hold down their jobs.
• But costs have gotten prohibitively high and could soon rise even more.

Kayanna Jackson is in a bind.

To keep the doors open at her Southampton Township, New Jersey, childcare center, she needs to find new clients or new funding.

Jackson is just one of many providers across the US entering a period of uncertainty after a pandemic-era infusion of federal childcare funding ran out at the end of last month. The lack of funding could lead some providers to raise prices or eventually close altogether, a development that would likely force some parents to pull their kids out of care and drop out of the workforce.

"The ending of funding will result in higher and more-frequent tuition rates," Patti Smith, the director of the Greenway Learning Center in Maryland, told Insider. "It will also mean that our lower-income clientele will be unable to afford our program. Without tuition assistance, these families will have to rethink work options as childcare options decrease."

In 2021, President Joe Biden's American Rescue Plan allocated $24 billion in grants to stabilize the childcare sector. Some providers say the money helped keep them afloat. That funding expired on Saturday, along with $13.5 billion in childcare funding from other pandemic-era legislation.

Last October, 41% of the over 5,000 childcare-center owners and directors surveyed by the National Association for the Education of Young Children said their programs would be forced to raise prices because of the funding's end. Some said they'd be forced to cut staff and wages.

In Stanford's RAPID Survey project, which polls childcare providers and families about care, roughly two-thirds of providers said they used the American Rescue Plan funds to pay workers and give raises; many also used the funding for supplies. Almost one-quarter of the providers surveyed said they wouldn't have been able to stay running without the funding.

"We cannot raise wages because we cannot charge families more," Allyx Schiavone, the executive director of the Friends Center for Children, told Insider, referring to both the center and the overall industry. "So we're stuck in this situation, which is where we were before the pandemic, where we were subsidizing the entire economy on the backs of the women who work in childcare."

In 2018, over half of Americans lived in childcare deserts, where children outnumbered care spots by at least three to one, an analysis from the left-leaning Center for American Progress found. Those deserts were more likely to appear in lower-income areas. For parents struggling to get by, that meant childcare — which is already unaffordable in many parts of the country — was difficult to come by, too.

All that will likely worsen now with the expiration of pandemic funds, and working parents who depend on childcare will likely be strained.

"Not everyone can telework; two-thirds of working mothers with young children don't," a Brookings Institution report written by Lauren Bauer and Molly Kinder said. "For many of these women — among them, many low-income working mothers and working mothers of color — there is no wiggle room to manage a lapse in child care, even temporarily. And teleworking women need child care too."

Providers don't know what they're going to do

Julie Kashen, a senior fellow and the director for women's economic justice at The Century Foundation, told Insider the childcare cliff was "going to have major implications for our nation's children, families, and economy."

"I think the slight silver lining is that it won't happen all at once," Kashen said. "It's not like the cliff ends and then every childcare closes on October 1."

She added: "What we're likely to see is childcare providers doing everything they can to continue to operate. They will raise their rates, they will close a classroom or serve fewer kids, and then it'll much more likely be a last resort to close for good."

Schiavone, the executive director of Friends Center for Children, said the industry was already "in crisis before the pandemic."

"Now with this cliff, this funding cliff, we're really entering into what I would say is like a catastrophe," Schiavone said.

Cristi Carman, the director of the RAPID Survey, told Insider that families across all income ranges "tell us they're struggling to pay for childcare, and they're already struggling to find childcare in many cases."

"When there continues to be strain on the system, the people who are often hardest-hit are those who are already the most vulnerable and already in need of those supports," Carman said.

Shannon Hampson, a childcare provider in Lincoln, Nebraska, told Insider that the grants meant she could purchase museum memberships, books, and even clothing for lower-income children. Now that's coming to an end.

A few of the full-time kids at Hampson's center receive a childcare subsidy. Hampson said the grants "made a huge difference for me to be able to take that many children on childcare subsidy because I had those grants to help cover that loss of income."

She would never replace children in her care, she said, but as kids begin to age out, she's going to have to look for more families who can afford the full cost of care.

"These are future citizens of our communities, and if we don't invest in them, then where are they going to go?" Hampson said. "All the research shows that zero to 5 are the most important years of these kids, and we're not giving them the resources they need."

The cliff might also have economic consequences beyond access to childcare.

"Childcare holds our economy together," Rep. Katherine Clark, the House minority whip, said at a press conference last month.

Both lower- and middle-class families will feel the burn; Kashen said even middle-class families had long struggled to find and afford childcare.

"The industry did suffer a pretty severe shock, and I think it'll take time to recover," Julia Pollak, the chief economist of ZipRecruiter, told Insider, adding that it's time for "policymakers to pay attention."

"There'll be a cap on how much we can improve female labor-force participation and how many women who want to work will be able to do that unless we shift the way we subsidize education and make it somewhat more logical," she said.

While a catastrophe may be coming, there's still some assistance for families. Kashen said the Child Care & Development Block Grant has "been in place to serve low-income families, and it also does not reimburse childcare providers for the true cost of providing care — so it keeps them in a precarious situation." States have until September to liquidate any remaining funds for this particular program from the American Rescue Plan Act.

But some kids will inevitably lose their care spots or have to be yanked out. Losing access to quality care means they may not be as prepared for school and miss educational and professional attainment for years.

"People are entrusting us with their most prized possession, and we want to give them the best that we can, but we're limited," Hampson said. "Unless we start getting support, we're not going to be able to continue what we're doing. And not for lack that we don't want to, we just financially are not going to be able to."

Are you a parent who's set to lose childcare or has already lost it because of closures or the cost? Are you a childcare provider who has had to close up shop or a childcare worker who decided to quit? Reach out to these reporters, mhoff@insider.com, jkaplan@insider.com, and jzinkula@insider.com.