In a series of posts, Myers and Stauffer will highlight parts of the American Rescue Plan Act of 2021 that can have tremendous impact on delivery and financing of services by state health and human services programs.

As part of our series on the American Rescue Plan Act (ARPA) of 2021, this next installment focuses on the additional grant funding for child care to provide relief for child care providers and provide support for families that need help affording child care. The ARPA provided $24 billion in child care stabilization funding and $15 billion in supplemental Child Care and Development Fund (CCDF) grants. The funding will be distributed to states on a formula basis.[1] Each funding stream will have unique requirements that will be outlined in Information Memoranda (IM) published by the Office of Child Care (OCC).

The $24 billion in child care stabilization funding is specifically designed to assist the struggling child care industry that has been impacted by the Covid-19 pandemic. The funding will be provided to the states’ Lead agencies and OCC has indicated that Lead agencies must spend most stabilization funds (at least 90 percent for states and territories and at least 80 percent for tribes) as sub-grants to qualified child care providers to support the stability of the child care sector. Providers can spend these funds on a variety of key operating expenses, including wages and benefits, rent and utilities, cleaning and sanitization supplies and services, and many other goods and services necessary to maintain or resume child care services.

OCC is encouraging Lead agencies to make applying for and receiving the funding easy and straight forward for child care providers to ensure the funding reaches them quickly. OCC indicated that stabilization grant funding will be exempted from the quality and direct services spending requirements under the Child Care Development Block Grant.[2] Generally, administrative costs are capped at 5 percent for states and 15 percent for tribes, however the ARPA funding permits up to 10 percent for states and 20 percent for tribes to be spent on administrative activities, supply-building activities, and certain types of technical assistance.

In the IM released in May 2021, the OCC focused a great deal of attention on building the supply of child care in communities. They also strongly encouraged states to use a portion of their set-aside to cover the cost of staffing and systems necessary to administer the program and help stabilize the child care sector.

OCC listed a few examples of activities for Lead agencies to increase the supply of child care that include:

  • Facilitating a financing program with low- or no-interest loans to programs interested in start-up expansion, or improvement in areas of need.
  • Providing technical assistance on business practices.
  • Developing and implementing a strategic plan for building supply.
  • Improving lead agency data systems that will be used to better meet the demand for child care.
  • Conducting community needs assessments.
  • Making efforts to increase access to licensing or participation in quality rating and improvement systems.

States may have child care systems that have struggled to keep their facilities up to date with current licensing requirements. States providing funding directly to support families with child care costs may have struggled to establish supplemental rates that reflected the current cost of child care in the community. This child care funding provides opportunities for states to look at creating stronger internal infrastructure to support child care, such as a standardized system for assessing community based rates or a financing program that provides support for child care centers who need to make facility improvements to align with community needs or licensing requirements. The funding, specifically allocated to stabilization and not intended to be used for direct child care costs, provides states with an opportunity to increase administrative and structural support to the child care industry without reducing the amount they are spending on direct payments for services.

The funding also provides an opportunity for states to examine other models of child care settings that have shown promise, such as child care centers that are located alongside nursing facilities. It can provide states with funding to better support children with disabilities in an integrated setting by providing facility modifications and training for staff. Other options might include providing information and assistance to businesses who may wish to offer space or support for an on-site child care center. Such option may be particularly relevant to employers whose primary place of business is distant from the community, such as large data centers or warehouse systems who build large business complexes outside of communities. There is some evidence that providing on-site child care can reduce staff turnover and disruption which may offset the lack of workplace flexibility that may not be possible in some business settings.

With a significant increase in funding and an industry that has been struggling for an extended length of time, there is urgency in the need to distribute the grant funding immediately. The majority of the funding is directed to providers on a quick timeline to provide immediate relief. However, the 10 percent allocation available for state Lead Agency use provides them an opportunity to invest in program and state infrastructure and develop a long term plan designed to close the gaps in their current system so that the changes made now extend well beyond the life of the funding.

If you would like more information about the ARPA or about how Myers and Stauffer can help to implement and leverage grant, Medicaid or other health and human services programs please contact us.



Contact the Contributors:

Catherine Sreckovich
Julia Kotchevar, MA
Health Care Senior Manager