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Impacts of the expiration of federal child care stabilization funding and the mitigating effects of state-level stopgap funding

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The White House
government document
Publication Date: 
27 Jun 2024



The March 2021 enactment of the American Rescue Plan provided historic federal funding to the child care industry. The unprecedented $24 billion in subsidies to providers helped to stabilize the industry during the COVID-19 pandemic, while also addressing preexisting challenges in the market for child care. The flexibility of the funds helped providers stabilize their businesses in one of the most tumultuous periods in recent history.

In November 2023, the CEA published a working paper that evaluated the impact of the child care stabilization funds allocated by the American Rescue Plan. The working paper largely focused on the onset of those funds and found that the child care stabilization funds accomplished their eponymous goal of stabilizing the industry, resulting in increases in wages and employment for child care workers, as well as increases in the labor force participation rate (LFPR) and employment for mothers of young children.

The end of June 2024 marks nine months since the child care stabilization funds formally expired. As the child care industry is one that often operates on slim margins and has historically been unable to provide enough affordable slots for families (U.S. Department of the Treasury, 2021), the expiration of funds posed a threat to the positive progress made. Recognizing this threat, eleven states plus the District of Columbia have implemented some level of “stopgap funding” to fill the gaps left in child care funding when federal dollars from the American Rescue Plan ran out. We define “stopgap funding” as state-level (or district-level in the case of DC) funds —usually via state-level budgetary processes—for stabilization purposes, which often take the form of direct grants to child care providers. Figure 1 shows the level of state stabilization as defined by spending per child under the age of 5 (i.e., the age group most likely to benefit from the funding).