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Contracting Can Boost Access to Early Care and Learning Programs

By Patrick Lyons and Jennifer Palmer  |  April 5, 2022

Low-income communities were disproportionately impacted by the COVID-19 pandemic—particularly families who faced job losses, lacked remote work options or lost child care arrangements. In fact, low-income households with young children were twice as likely as higher-income households to lose their child care because of provider closures or job losses, which made them ineligible for child care subsidies in some states.

Providers of early childhood care and education programs in low-income communities closed at a higher rate than their counterparts in higher-income areas due to tighter profit margins, which existed before the pandemic. These permanent closures will leave even more families without access to quality early care and learning programs—and possibly exacerbate the kindergarten readiness gap between high- and low-income students. Quality early care and learning programs have been shown to be effective in closing achievement gaps and in decreasing special education placements for low-income students in kindergarten to third grade.

Targeted Contracts

State policymakers could consider targeted contracts in at-risk communities to increase the availability of early care and learning opportunities. The contracts, which target funds toward specific child care providers, would benefit the families most in need, help parents get back to work and possibly save money in the K-12 system by increasing kindergarten readiness and decreasing placements in special education programs. Some states are already using contracts: Fourteen use them statewide, and eight use them in specific jurisdictions. Policymakers might use some federal pandemic relief dollars to fund a contracts-based program or pilot the program in select low-income communities.

Across the country, low-income parents who are working or attending school can qualify for federal subsidy vouchers to pay some of the costs for child care and early learning programs. However, state subsidy rates are often insufficient to cover the full cost of quality care and to provide livable wages to providers. The early care and learning vouchers are tied to the child and paid to the provider based on the number of hours a child attends the program. However, this causes financial problems for providers if children stop attending suddenly or have poor attendance. Low-income families tend to move more frequently due to housing insecurity, seasonal work and other factors. In the worst cases, the combination of low subsidy rates and worries about family turnover can lead providers to serve only families who can pay market rates and to exclude families using subsidies. Because many providers are affected by these considerations, it can be difficult for subsidy-eligible families to find available early care and learning slots.

States can develop programs that ask providers to offer child care slots for low-income students in exchange for a higher reimbursement rate for those slots and a guarantee of payment regardless of attendance. The higher reimbursement rate and guaranteed financial stability are incentives to providers to offer more slots to subsidy-eligible families and can help to stabilize local early care and learning markets. Stable income will allow contracted providers to continue to operate at a time where many providers are closing.

Georgia Initiative Finds Success

In 2015, Georgia launched the Quality Rated Subsidy Grant Initiative to expand infant and toddler care opportunities for subsidy-eligible families. Participating providers were awarded slots in the program with a 50% higher subsidy rate, which was paid in full regardless of attendance. The providers were empowered to recruit and enroll subsidy-eligible children under age 4 to keep the spots full. The grants were awarded through a competitive process and were open to center-based providers with two- or three-star ratings in the state’s quality-improvement system and lower child-staff ratios compared with licensing standards. Providers also had to offer Georgia’s pre-K program, so children could enroll after age 3 to maintain high-quality continuity of care for at-risk families.

The initiative aimed to:

  • Improve access to high-quality early care and education programs for low-income families.
  • Reimburse providers at a rate that would support the cost of high-quality care.
  • Create a predictable and stable subsidy funding model for child care providers.
  • Create opportunities for closer relationships between child care providers and families.

The grant program was piloted from 2015-17 using Early Learning Challenge Grant funds. Increased federal Child Care and Development Block Grant funding allowed for a statewide launch in 2018. The program was ended at the start of the Covid-19 pandemic.

A similar subsidy model was piloted in Pennsylvania. In an evaluation of the program, 89% of providers agreed that the contracts stabilized child enrollment in their classrooms; 67% said they paid teachers in pilot classrooms higher wages due to the increased reimbursement rate; and 56% said participating in the program helped decrease staff turnover.

Patrick Lyons is an early education policy specialist in NCSL’s Education Program, and Jennifer Palmer is a senior policy specialist in NCSL’s Children and Families Program.

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