Screenshot: New America

“Providers need predictable, stable, and adequate funding,” New America says in a new policy brief.

Instead of rebuilding the old system of funding child care slots for low income children based on children’s daily attendance, states should, as the brief’s title says, “Make Child Care More Stable: Pay by Enrollment.”

Now is the time to act because Congress has invested $50 billion in Covid relief funds for child care.

As the brief explains, the attendance-based subsidy system has two glaring flaws. Subsidies often don’t cover the cost of providing child care, and they often don’t provide enough financial help to families.

“In most states, many providers serving children eligible for subsidies are paid several weeks after services are rendered and the amount can vary based on individual child attendance and reimbursement rates, even though provider costs are not determined by how many days a child is present. This monthly variation makes it difficult to make informed decisions around budgeting, staffing, and enrollment.”

This “perpetual underfunding” and “fragmentation in delivery” result in “uneven quality and access to services” that “places financial burdens on families, and perpetuates inadequate wages for the ECE workforce.”

The national nonprofit Child Care Aware of America concurs. In a blog, Child Care Aware notes:

“During the pandemic, many states implemented new policies about how child care subsidy reimbursements were paid to providers. They shifted from basing the subsidy reimbursements on attendance (how many children providers served on a given day) to basing them on how many children were enrolled in a program. Typically, enrollment numbers are higher than attendance, because children can be absent (not attend) for a variety of reasons such as illness or vacation. The switch from attendance- to enrollment-based subsidy reimbursements helped stabilize the child care sector, preventing it from a pandemic-induced collapse.”

There’s also evidence to support this approach. Last year, New America and Child Care Aware worked together “to examine the impact of one of these funding streams, the CARES Act, on the child care system. We paid particular attention to instances in which CARES-based subsidies were paid to providers based on their enrollment rather than attendance.”

The two organizations worked with Strategies for Children and “Child Care Resource Center, a Child Care Resource and Referral (CCR&R) agency that serves Los Angeles and San Bernardino Counties in California.”

“Ultimately, our findings make a strong argument that both southern California and Massachusetts’s switch from an attendance-based payment system to an enrollment-based reimbursement system during the COVID-19 pandemic stabilized those markets during an otherwise turbulent economic time.”

Other states are also pursuing this approach.

“Some states like New York and Maine are beginning to realize the necessity of reducing this uncertainty and are moving forward with longer-term policies. The Department of Early Education and Care (EEC) in Massachusetts will continue to pay providers based on enrollment” through the summer months, according to the latest information from EEC. 

“Utah took a significant step in their long-term planning efforts by passing legislation in March 2021 to pay providers based on enrollment until 2023. More states should consider prioritizing funds to restructure provider reimbursement policies so they are based on enrollment for a greater length of time or, even better, made permanent.”

“In several places where an enrollment reimbursement program was implemented, reimbursement trends remained stable or even improved from pre-pandemic levels. In these instances, it was not only providers that benefited. The additional dollars infused into child care programs improved the services they were able to provide to all their children, whether subsidy-eligible or not.”

Enrollment-based funding is, however, only a first step. 

As New America says:

“While paying providers in advance based on enrollment would be a substantial improvement over the current system, it is important to acknowledge the fact that reimbursement rates are too low. Increasing reimbursement rates so that they adequately cover the full cost of providing quality care, including raising teacher compensation, is crucial. Ideas like funding child care as an entitlement or increasing opportunities for the workforce to engage in collective bargaining are also worth considering as part of a robust strategy to improve our ECE system.”