Lack of access to affordable child care was a problem before the pandemic. Today it is a crisis.
There are at least 16,000 fewer child care providers today than before the pandemic. And in the last year, the cost of daycare has far outpaced inflation. The cost of child care has risen between 5-7 percent and is consuming 17-20 percent of a family’s income, putting pressure on family budgets already stretched by rising food and gas prices.
Lack of affordable child care is also holding back our economic recovery, with over 1 million fewer women in the workforce today compared to before the pandemic — a major source of the current labor force shortage.
We need action now to help working families and our economy. Here are five things Congress, state governments and employers can do today.
First, Congress should increase funding and expand eligibility for the Child Care and Development Block Grant (CCDBG) program. CCDBG provides funding to states for child care vouchers that are given to low-income working parents, but fewer than 20 percent of eligible families actually receive a voucher. Congress needs to reauthorize this program and adjust the eligibility thresholds from 85 percent of the state median income for families to 150 percent. This would help address the “benefits cliff,” or when a family’s income is too high to be eligible for benefits, but not enough to meet their needs.
Reauthorization of CCDBG should also eliminate copays for families making below 75 percent of the state median income, encourage input from the business community in state-level plans and address child care gaps that working parents face, including the need for full working day/full working year child care hours and third shift care.
Second, Congress should give states more flexibility to spend child care funds — and states should ease the regulatory burden for stabilizing or expanding child care facilities.As part of the pandemic response, Congress provided states with $39 billion to support child care, including $24 billion directly to support child care providers. These funds must be obligated by September and can only be used to support child care centers already in existence. Yet, the most crucial needs right now also include supporting new child care providers and expanding the number of slots open at existing providers to make up for centers that permanently closed during the pandemic. States need more flexibility, and more time, to put their funding from Congress to work.
At the same time, states should look to Indiana and North Carolina for ways to remove regulatory barriers and expand capacity and look to Kentucky for an employer-led approach to easing the high cost of child care.
Third, states that have already used their child care funding, or that are looking for greater flexibility, should use other pandemic aid to expand the availability and accessibility of child care. Fearing that state revenues would plummet because of the pandemic, Congress provided state governments with nearly $200 billion in aid that can be used for almost any project addressing pandemic impacts. Luckily, state revenues held up, and now states are sitting on record surpluses that can be used to support child care — like Rhode Island, Wisconsin and other states have done.
Fourth, Congress should reinstate the Child and Dependent Care Tax Credit (CDCTC) expansion.
Last year Congress temporarily expanded the CDCTC, which gives parents the ability to choose their provider, length of care and type of care (such as in-home, private or faith-based) to align with their needs and schedules. The expansion, which expired on Jan. 1, made the credit refundable and increased the maximum benefit to $8,000 from $1,200 for two or more dependents. Congress should reinstate the CDCTC expansion, retroactive to the beginning of the year.
Fifth, Congress should simplify and expand employer tax breaks that help employees access child care — and employers should be sure to take full advantage. Current law provides three tax benefits for employer-provided child care:
- Employers can contribute funds to a flexible spending account to help employees offset the cost of child or dependent care.
- Employers can receive a tax credit for up to 10 percent of the cost of providing child care resources through a contract with an independent provider.
- ·Employers can receive a tax credit for up to 25 percent of the cost of providing onsite child care (including construction costs), or 25 percent of the costs of contracting with a child care provider. These credits are capped at $150,000 per year, but Congress should increase and expand the credit to cover the costs of employer-provided subsidies or vouchers.
In many ways, the nation is still bearing the brunt of the pandemic. There are women hoping to rejoin the workforce, families experiencing poverty and employers desperate for employees. It is time for policymakers to focus on proven programs and areas of agreement as a critical first step toward a stronger, more equitable child care system that meets the needs of working parents and employers.
Cheryl Oldham is vice president of education policy at the U.S. Chamber of Commerce and senior vice president of the Center for Education and Workforce at the U.S. Chamber of Commerce Foundation.