Grants that sustained state’s childcare industry set to expire

SINCE BETH SIDEL opened 4 The Love of Learning Preschool in Montague a dozen years ago, she has almost always had a waiting list. But since the pandemic, she has consistently had vacancies. 

Sidel doesn’t know if it’s because parents found alternative childcare arrangements or if a nearby bridge going under construction made the commute too long. But with seven students currently enrolled – five during the summer – instead of the eight she can legally serve without an assistant, Sidel misses the tuition money. 

What helped her get through the last year is the grant she has received monthly since July 2021, which has cumulatively given her an extra $17,755. She’s used it to offer “makeup days,” where children who are out sick can get additional childcare days without paying more. She hired a speech pathologist. She built a shelter outdoors and is working on a playhouse.  

“I’m able to use those to make improvements to my program inside and outside, the kind of extras that make it a higher quality program,” Sidel said.  

But the monthly grants – from the state’s Commonwealth Cares for Children, or C3, grant program – will end this month, if the governor and lawmakers don’t get on the same page to extend them.   

The C3 grants have been a financial lifeblood for childcare programs that struggled to make ends meet as enrollment fluctuated and staffing challenges abounded during the pandemic. They are also unique in that they provide public support to what is mainly a private system. While other state efforts have shored up subsidies focused on low-income and at-risk kids, C3 grants are available to all licensed providers, including centers, family care providers, and the approximately half of providers who do not enroll any subsidy-eligible children.   

They are also a more secure form of revenue because they are based on how many children a center is licensed to serve, so they do not fluctuate as enrollment changes.   

As childcare closures during the pandemic highlighted the importance of childcare to the state economy, lawmakers have been talking about ways to provide more public support to the largely private system. But in the meantime, while Gov. Charlie Baker has tried to extend the grants beyond June, the Legislature has not yet agreed. 

Secretary of Education Jim Peyser said in an interview Wednesday that he sees the extension of the C3 grants as “in some ways a bridge to a longer-term reform in the way we finance childcare.” Until now, Peyser said, the focus has mainly been on providing subsidies for the neediest children. But the usefulness of the C3 grants, he said, highlighted the additional need for public money to cover basic operational expenses.  

“Some combination of those two things is probably where we ought to be going permanently in order to make sure we’re supporting the whole system and in order to provide access to childcare that the workforce needs and employers need,” Peyser said.   

The C3 grant program was started with federal money dedicated to pandemic-era childcare stabilization. The Department of Early Education and Care developed a formula to distribute the money based on each center’s capacity and staffing costs, with an adjustment to give more to providers in high-poverty areas. More than 87 percent of eligible childcare providers are participating in the grant program, which has distributed $380 million.   

In February, Baker proposed spending $450 million to extend the grants for another year, through June 2023. The extension would have used all of the $200 million in federal childcare funds that Massachusetts still has unspent, along with some state surplus. The Legislature did not include the money when it passed its version of the supplemental budget bill.   

The Senate proposed spending $250 million – including $50 million of the federal money – to extend the program through December 2022 in its version of the fiscal 2023 state budget. The House did not, choosing to focus its efforts instead on providers who take subsidies for low-income children. The budget bill is in conference committee.   

Peyser said he is “definitely concerned but hopeful” that an extension will ultimately pass.   

While the money was intended to stabilize the sector during the pandemic, new data released by the Department of Early Education and Care on Tuesday, based on a survey of nearly 5,700 providers, indicate that much of the need now is around staffing. 

Lauren Kennedy, co-founder of Neighborhood Villages, an early education and care advocacy group, said the grants have “been really crucial to providers’ ability to sustain existing payroll and make investments in increasing salaries, which has been critical in this labor market in which there is an early education and care workforce crisis that’s built upon a wage crisis.”   

According to the EEC survey, the biggest chunk of the money so far – $149 million – went toward operational expenses, including $88 million on payroll and benefits for existing staff. Another $47 million went to new expenses, including $38 million in salary and benefit increases. Centers reported spending nearly half their grant money on staff payroll and benefits, while family providers who work out of their homes spent nearly half their money on other operational expenses, like rent, mortgage, utilities, or insurance. Between November and April, providers overall reported a shift toward using more money to pay for staff.  

Given the focus on staff, it is unsurprising that should the grants end, providers reported that the main area they would cut is staff salaries. Most centers – 85 percent – have raised educator salaries since the grants started in July 2021. More than 80 percent of centers reported that staff salaries would be negatively affected – either by reducing compensation or deferring additional salary increases – should the grants expire. Family childcare providers, who generally only have one or two staff, gave fewer raises the past year and reported that they were more likely to increase tuition or reduce discretionary program expenses than cut educator salaries. 

Kennedy said this is a particular problem given the existing crisis in childcare staffing. The ECC data found that 23 percent of providers were unable to serve their full licensed capacity because of unfilled staff openings. “Early ed providers can’t pay their teachers what those teachers could make at Amazon, in Starbucks, in name-your-industry because if providers would be able to raise salaries to that level, which they want to, then they would have to raise tuition for families, and families can’t afford to pay for those tuition raises,” Kennedy said.  

Kennedy said that leads to a cycle where early education loses teachers, then can’t enroll children, then families lack the childcare they need to go to work. 

“The field would say this money is still critically needed largely because of the workforce crisis they still find themselves in,” Kennedy said. “They need capacity grants to sustain their existing payroll, offer salaries to entice new talent into the field, and make sure the quality teachers they have don’t leave.” 

An even more dire circumstance would be if more providers had to close due to financial struggles. According to Peyser, since March 2020, when COVID-19 hit, about 1,400 programs closed their doors, taking more than 20,000 slots out of the childcare system. Since the C3 started last summer, only a handful of programs that receive the money closed. “It’s had a tremendous effect in terms of keeping programs open,” Peyser said.  

On the recent EEC survey, 8 percent of centers and 17 percent of family childcare providers said they could close their program if the grants are not renewed.