“These are my grandkids and my daughter has to work,” she explained in an interview with Better Life Lab, published in . “If it wasn’t for me, who would take care of my [grand]baby for no pay?”

The complicated, bureaucratic process around child care subsidies and payments is something many child care experts believe must be addressed for the system to work for more families. In better news, innovations surrounding the subsidy model are showing great promise for correcting some of these problems – including changing the way rates are set.

“For years, subsidies were set by a market rate,” explained Simon Workman, principal of Prenatal — Five Fiscal Strategies, a consulting group focused on early education. States determine the “market rate” via a survey of what parents are willing to pay for care.

But in 2016, federal regulations changed and states were allowed to explore alternative models for setting subsidy rates. Instead of looking at market rates (what families are willing to pay), innovative states began to look at true cost (how much actual care costs to deliver). What followed was a burst of innovations across the states focused on the way subsidies are determined, delivered and at what amount to a variety of providers.

Understanding the flaws of the current subsidy system

Currently, only a small fraction of families that qualify for child care subsidies actually receive them, — 75% — receiving subsidized care attend licensed child care centers. go to families who use informal, Family, Friend and Neighbor caregivers like Sanchez in the child’s own home.

Much of the funding for child care assistance comes from the federal Child Care and Development block grant, . The CCDBG gives states flexibility in how they develop their child care programs and policies, and distribute funds given to them annually by the federal government. Under federal regulations, the block grants subsidize child care for families with incomes up to 75 percent of state median income (there are proposals to raise this rate to ), and also provide funds for activities to improve the overall quality and supply of child care, .

Today, approximately 1.8 million children receive CCDBG-funded child care in an average month, but that includes just one in seven eligible children. It is through these funds that a provider like Sanchez can get paid, in a state like California which allows FFN providers, who are unlicensed, to receive child care subsidies. (Eight states and D.C. to receive subsidies). FFN care is especially crucial for marginalized communities, who may seek a cultural connection or relation for their preferred caregiver, as in Sanchez’s case where the preference is for a grandmother to care for her grandchildren.

In addition to subsidies going to too few children, another major flaw is the way subsidies are calculated that makes quality care out of reach for families. Until recently, the subsidy reimbursement amount set forth in the rules of the CCDBG was pegged to the 75th percentile of that market rate. That means if a state finds the market rate for child care is $419 per week ( — the most expensive in the country), then families who qualify for child care subsidies will receive three-fourths of that price to send their child to a qualifying provider. In most instances, it is up to families to pay the differences or for providers to absorb the cost difference.

But this model often doesn’t work well, explains Workman. In practice, most states can’t afford to set the subsidy rate at the 75th percentile. Even with the federal block grants and any additional state revenue earmarked for child care (only some states contribute; others rely solely on federal funds), there often isn’t enough.

Further, in rural areas, the subsidy rate is even lower. The market rate of child care established in surveys could be very low, and yet the cost of providing care still remains high. For example, rural providers must still pay for educators, facilities, supplies, equipment, food and all other expenses, even if their clientele are more dispersed and live farther from the provider. Finally, the low rates from subsidies mean providers take in less money per child, and then are forced to cut costs even further. “What it really means is that providers who cannot get much money from parents get very little from the government. Inequities from the market continue into the subsidy system,” Workman said.

Key finding: Innovations are still needed around subsidies and making the process more accessible and understandable for families. This includes making more subsidies available at higher dollar amounts and for different types of care, including home-based and family, friend and neighbor care.

Washington, D.C.’s cost estimation model

In 2016, the Office of the State Superintendent developed and conducted a to further understand the actual costs of care. This model, which was later revised in 2018 and 2021, took into account different types of child care, at different ages, in both home-based and center-based offerings.

This was the first locality to set rates based on true cost, not market rates. True cost is defined as how much care costs to provide; market rate is the the sticker price a family is willing to pay.

According to Workman, this cost modeling has helped inform other improvements surrounding child care: reforming licensing rules, improving ratio and group size requirement, updated quality rating and improvement systems, and including additional support staff — like coaches and health consultants — in calculating the base rate of what constitutes quality care.

New Mexico’s cost-modeling

, New Mexico Gov. Michelle Lujan Grisham, made creating a universal early childhood education system a big part of her platform. The state built a cost model, similar to that done in D.C., to find the true cost of quality care, and then set reimbursement rates based on costs, not market rate. Under this new approach, centers are incentivized to accept the subsidies and better compensation to provide high quality care.

New Mexico also drastically increased the income level of families who qualify for subsidies, raising it to 300% of the poverty line. As of May 1, 2022, New Mexico has since , the only place in the country to do so.

Higher subsidy reimbursement for FFN in California

Traditionally, non-center-based care models — including home-based or family-care, or Family, Friend and Neighbor Care — are paid less money per subsidy for the same work. And in eight states and D.C., unlicensed providers, like FFN, are not eligible for subsidies at all.

California is an example of a state that provides subsidy reimbursement for unlicensed Family, Friend and Neighbor Care providers like Sanchez, and California recently negotiated an increase for those providers’ pay.

Some of this support can be attributed to the new union: California’s Child Care Providers United. The union has successfully negotiated better reimbursement rates both for FFN and family-care providers. Licensed family caregivers who accept families on child care subsidies receive up to 75 percentile of the 2018 regional market rate survey , and FFN caregivers get 70% of the licensed caregiver rates — a 40% increase in their previous pay.

The CCPU also negotiated with the state to provide one-time supplemental payments to family child care providers as a bonus during COVID. in spring and summer 2022, large family child care providers (more than six children) received $10,000, and small family child care providers (fewer than six children, , can be fewer than eight children) received $8,000. And FFN providers each received $1,500. Additional payments will be forthcoming in FY 22-23.

“What we hear from our members is that this [stipend] allowed them to pay off credit cards and expenses from COVID,” Aroner said. “It was these providers that carried the ball during the pandemic. They were the ones that stayed open and put themselves at risk.” And if the money runs out? Nationally this continues to be a problem, as closed during the pandemic, due in large part to operating costs.

Georgia’s Quality Rated Subsidy Grant Program

To address the shortage of licensed high-quality infant and toddler care, Georgia’s Department of Early Care and Learning began its program in 2015 to change the way providers and families interacted with child care subsidies. Rather than using a traditional child care voucher, in which a voucher is paid to a child care center when an eligible child enrolls, Georgia’s new program relied on grants to pay providers directly and to contract a select number of slots. Using this “contracted spots” modeling, the state guaranteed the providers a level of income that allowed them to pay staff and stay open, even as a child’s circumstances changed and enrollment dipped.

Participating centers received reimbursement that was 50% higher than the base subsidy rates, a strong incentive to participate in the program. The providers were trained by DECAL staff in how to recruit families, and verify and re-certify family eligibility. Families in the program did not owe copayments, unlike in Georgia’s traditional subsidy program.

This process achieved several goals.

1. It kept a certain number of slots in high quality programs for low-income children.
2. It allowed the child care providers to maintain some stability even as families and children changed child care centers.
3. It allowed participating centers to receive more money for accepting children with subsidies, rather than less.

Katrina Coburn, Senior Manager of State Policy at Zero to Three, who provides technical assistance to state advocates and policy makers, says that more states are beginning to explore this model as a way to stabilize child care programs and to increase access to high quality programs. The infusion of funds through ARPA has given some states the means to pilot this approach.

Unfortunately, Georgia cut funding for the program in 2020, which Coburn attributed to the political landscape. Mindy Binderman, the executive director of the nonprofit Georgia Early Education Alliance for Ready Students, and child care advocate, explained that each state department was directed by the governor to come up with a 4% across-the-board cut. “In the context of the budget cuts mandated by the Governor, it was the least worst option,” Binderman wrote in an email.

Is it enough? Not without more federal support.

Georgia’s break with a successful program exposes the limits of state innovations, even successful ones. Coburn says that the contracted spots model of Georgia is “starting to be recognized as the norm,” with the funding for ARPA being used for similar programs underway in Pennsylvania and Illinois.

“The issue is that subsidies can only do so much,” explained Workman, the early education consultant. Unless a program runs on 100% subsidies, there isn’t going to be a guarantee that the teachers and staff can get a salary. Even improvements in the level and availability of subsidies will not fully solve the fragmentation as only dedicated funding streams create stable jobs at affordable salaries. , subsidies reach only one in seven eligible children, and many more families who are not eligible for subsidies still struggle to afford quality care.

Even the states that have worked to institute such significant public investment — like Vermont and New Mexico, discussed in , will face other limitations.

“The problem with relying on states for child care innovations is that at some point, states will run out of money,” explains Elliot Haspel, author of Crawling Behind, and a top voice in child care and early education. Haspel also write for Early Learning Nation.

“States have traditionally been these laboratories of democracy, they serve that role well. With the political realities at the federal level, states have more of the burden to bear,” Haspel said. “States can help lead the way, to help inform and have a two way dialogue. There is no way we are going to get a fair system until we get federal funding flowing.”

Read other parts of this series here: , , .

Nearly all the money she makes, she explains, goes back into the business: for supplies, playground equipment, toys and staff. After expenses, she estimates she took home $30,000 last year.

“Not much for a small business owner,” she said. One of her two employees is her sister-in-law, who has spina bifida and limited feeling in her lower limbs, which makes her prone to infections and occasional hospitalization. When she is out, Gale can’t afford to pay her, nor does she have the staff and paperwork capabilities to apply for disability or job assistance. “I care about her, and she genuinely cares about the children,” Gale said.

What Gale faces, like so many other child care providers, are the demands of running a small business with . Roughly 30% of infants and toddlers go to a home-based program, and estimates from Home Grown show that 1.2 million paid carers work inside their home, like Gale. And that the day care industry is highly fragmented, with nearly 90 percent of the establishments being single proprietorship day care providers and educational professionals — like Gale herself. Unlike other peer competitive countries, most of this country’s child care is unsubsidized, so it’s up to parents to pay the full cost while transferring some of the high-cost burden to the employees, many of whom make poverty wages. On top of that, the owner of the child care center is expected to manage the staffing, payroll, marketing, communication and benefits on top of everything else.

One of the most promising innovation areas we found in our on-going child care research is the growing number of technological and financial tools available to help the business side of the child care industry run more smoothly and efficiently — which can ease the time burden on owner/providers and potentially lower costs for parents and providers. While such innovative efficiency fixes can be very useful to individual child care centers, they are not a substitute for substantial public investment. Full enrollment, better marketing or payroll assistance can boost market efficiencies, but it will take real federal investment, year over year, to help families cover costs and boost child care educator wages, or robust family-supportive and safety net policies that would allow home-based providers like Gale to have her employees take paid sick leave without hurting her bottom line.

Key finding: Some of the most promising, scalable innovations are those that seek to centralize administrative roles and allow child care centers to focus on providing quality care, not back office functions. This can help lower costs for parents and overhead, keep family homes and small child care centers sustainable, and raise the low wages of child care workers.

Solutions that increase the pay for child care without adding costs to parents

Mirza is a fintech company that works with employers to subsidize the cost of child care so their employees aren’t forced to drop out of the workforce. The employers give a zero-interest loan, between $5,000-$7,000 per year, that an employee puts toward child care and can repay over three years, or get chunks of it forgiven with retention and attendance incentives. This program allows parents to afford quality child care without taking income away from the providers. Mirza integrates with an employee’s payroll provider so that monthly loan payouts and repayments happen automatically.

“It’s actually a care subsidy disguised as a loan,” said Siran Cao, the company’s co-founder. Since many parents are having children during some of the peak career-building years, stepping away from work comes at a much higher cost. “That is a period where the opportunity cost of leaving the workforce is missing some of that career acceleration.”

Mirza is in the process of launching with U.S. companies and Cao expects to do so in the summer and fall of 2022.

Solutions that match families with providers and provide back-end office supports

Probably one of the most talked about solutions for making child care more accessible and affordable without the addition of a significant federal or state investment are those that work with existing child care centers to centralize administrative costs, and take on some of the administrative burdens, including personnel, placement, covid-19 mitigation, and external communications and marketing.

Winnie, Wee Care and Wonderschool offer such administrative support. All three conduct an online marketplace for day cares — connecting families with open spots — with the goal of allowing providers to operate at peak capacity and spend less time on administrative tasks. The low-margin industry of child care operates most effectively when all spots are filled, so these companies are doing a service to improve access and lower operating costs for the providers.

Innovations at a glance

Wonderschool is a two-sided marketplace meant to help parents find child care options and offers a child care management system for day-to-day operations. This CCMS provides online enrollment and enrollment management, tuition processing, financial recordkeeping tools, a CACFP food program solution, daily attendance tracking, a parent communication and engagement tool, and an online community for providers.

The child care providers — 80% of which run home-based day cares — can self-select which level of Wonderschool access they want and need, with prices ranging from $2 a month per child to access the Wonderschool child care management system, to up to a 10% revenue share for opting into a higher tier of service with marketing and enrollment support. In some cases, a sponsoring agency like a government agency or child care network will purchase Wonderschool access and make it available to the child care providers within their communities. Two examples include the program and the program. Wonderschool also offers a New Supply solution, in which new child care programs are supported in setting up, getting licensed and onward into operations.

“Technology solutions provided by the Wonderschool platform help keep administrative costs low, efficiency high, and programs fully enrolled and profitable; these are all key components of running a sustainable child care business,” said Mia Pritts, Wonderschool’s VP of Strategic Partnerships.

Winnie matches families looking for day care spots with licensed providers using publicly available state data. While Winnie is free for any provider to use (the founder Sara Mauskopf gives the analogy of Yelp, where anyone can claim a page), subscribers of Winnie Pro pay $199 per month and receive prominent placement, lead generation and a better web presence with more customizable features.

By keeping the centers at capacity, or close to capacity, they are helping to increase the profit margins. Mauskopf’s own research estimates that if the average cost of day care is $844 per month (with some locations being much higher) Winnie Pro subscribers net a return on their investment by keeping spaces filled just two weeks faster.

“With this audience, we are able to help child care businesses fill their open spaces on average 2 weeks faster than if they did not use Winnie to list their open spaces,” said Mauskopf. “Given the average cost of day care in the U.S. is , or $844 per month, when Winnie helps a center fill a space two weeks faster that’s $424 they’ve made, or $225 after the cost of the subscription.”

WeeCare also serves as a marketplace for parents and child care centers – both home-based and day care centers. Participating providers are considered “Wee Care Directors” and by participating, are better able to fill their child care centers to capacity.

Similar to Wonderschool, Wee Care offers back-end support, including accounting, marketing and a web presence. WeeCare estimates that such administrative tasks being outsourced saves 20 hours per week for the child care provider. The company collects a percentage of the enrollment feeds from any leads generated, though a spokesperson for the company said they’ve been reducing that fee as the majority of their growth revenue comes from creating an employee child care benefits program.

Solutions centralize administrative costs and services for multiple centers

Neighborhood Villages serves as a de-facto school district for five child care centers in the Boston area. This nonprofit operates as the back-end support for the centers, providing a family coordinator on the ground to help with wrap-around services, such as housing or food support for a family in crisis, and a central office function to assist with personnel, administrative functions and issues as they arise, such as creating a comprehensive Covid testing system. (Read more about Neighborhood Villages in ).

Solutions to make licensing easier

Questions of licensing currently vary widely across states. The process can be onerous, though it can matter a great deal when it comes to the quality metrics and subsidy reimbursement rates. Licensing too, gives a record of the child care space, which can in turn make it easier for families to find available care options. But for many families who rely on non-traditional child care—particularly home-based child care or Family, Friend and Neighbor care—the licensing process can be too much of an administrative hassle without enough upside.

Groups like , based in Massachusetts — a state with strict licensing requirements for child care — will help a child care provider navigate the licensing process free of charge for two years, then collect a referral fee for any placements made after those two years are up.

Innovations in this area focus on using the same forces that make private companies and services profitable and efficient — technology, data management, systems design — to improve affordability of child care. Each of these innovations is designed to improve upon the existing system, in which each child care provider is going it alone, and represent an infrastructure improvement rather than a total overhaul. There is a logic to this: substantial change is far more difficult and requires a great deal of political will and public investment.

It’s important to be cautious about developing or perpetuating false optimism that if only a child care center had a better website, or backend payroll system or full enrollment, the child care crisis would be over, that child care would be a more equitable and affordable good.

These innovations help, and they should be applauded in their efforts for making improvements, but by no means should they be considered a substitute for robust public investment and child care infrastructure, the same way our country’s policies and tax dollars support K-12 education. Until the day comes when early care and education receives the investment and support as a public good like K-12 education, these new technologies are making providers’ jobs easier, one improvement at a time.

Read other parts of this series here: , .

“I bribe them within an inch of their life in order for them to keep quiet,” Morgan said. Morgan is a bone marrow transplant coordinator, her husband also works in health care, and she has the later workday start at 7:00 am. The daycare, however, doesn’t open for another half hour. And this is the earliest option available anywhere close to where they work and live.

Tari Brodsky, a nurse practitioner in Long Island, New York, said that every mom she knows who works at the hospital has had this same struggle. Daycares tend to run between 7:00 a.m. to 6:00 p.m., but Brodsky, who works 12 hour shifts, has to be at work at 7:00 a.m. and isn’t finished until 7:00 p.m. When her twins were young, she worked the overnight shift, hiring a babysitter to come in the afternoon for four hours while she slept. Now, she works on Sundays, so that her husband can be home with the kids and she doesn’t have to struggle to find coverage.

Morgan and Brodsky both recounted these stories in an interview with Better Life Lab. But they aren’t alone in having this predicament. Traditional child care hours don’t work for all families, including families who have sporadic or inconsistent work. Nationally, only are open during nontraditional hours, which can mean anything from starting early, long shifts, overnights or weekends.

Families are different. They work different schedules. They need and want different things. And that changes over time as jobs change, life circumstances change or children grow up. In researching child care innovations on the state and local level, and echoed by a report from the , we found there is not a one-size-fits-all or “silver bullet” solution for how child care delivery should operate. But we do know that innovation surrounding nontraditional schedules and child care deserts are needed to increase supply and meet demand.

Key Finding: There is no one-size-fits-all solution to child care needs. Innovation surrounding nontraditional schedules and child care deserts are needed to increase supply and meet demand.

To improve supply, meet demand and provide support for a wider variety of families, innovators in the child care space are doing more to support home-based, family-based or Family, Friend and Neighbor care. Currently, such informal care settings , can be more easily set up and can be a better match for families who work non-traditional schedules or who are seeking a specific cultural match.

These “informal care providers” as many are referred to, can be licensed or unregulated, depending on state and local business regulations. Many have not received formal business and marketing training, yet are tasked with running a business as part of their child care. They may lack splashy marketing materials and brand-name recognition of center-based care. And several innovators spoke of a bias in home-based care, that it is perceived as less worthy or less valuable than center-based care. Innovators in this space are working to change that perception and show that home-based care plays a crucial role in child care delivery.

Other benefits to the family child care centers include:

• Children of multiple ages can stay together
• There can be a shared cultural or linguistic connection
• They can be more easily set up in traditional child care deserts, , and when quality child care for many people just doesn’t exist. In many cases, this model can be a better fit for a family, depending on their needs and priorities.

Home Grown Child Care – supporting informal care as a quality child care option

“There is a bias around home-based childcare,” explains Natalie Renew, director of , which connects funders with child care providers, provides resources to home-based child care, and advocates for providers to policy makers. Home-based child care centers are typically less resourced and less visible than center-based child care centers, especially those centers connected to existing institutions, like a school system. They also receive fewer funds under the federal child care subsidy system, even for doing the same work as child care centers.

The current child care system uses quality metrics as part of a process to calculate reimbursement rates for providers who accept subsidies. These systems, too, disadvantage informal care centers. “The typical framework for quality is based on teacher qualifications, room arrangement and indoor environments,” Renew said. “When we talk to families who use home-based care, we learn that they are defining quality differently: intergenerational relationships between parents and families; flexibility; small groups; consistent routines; feeling of safety. These perceptions of qualities — while valued in the literature — are not present in the quality metrics.”

, too, supports what Renew says regarding families’ preference for unregulated home-based care. “A lot of prior thinking is that this was a second choice, but it’s not what families want. But now families are saying we want unregulated home-based care,” said Renew. They want kids to sleep in their own beds and eat meals with people in their immediate community.

“Because our framework is so oriented around the activities, and the way we define quality in the context of centers, a narrative has developed that this is a lower quality of care,” Renew said. “The standards as written are modeled on school and center-based operations. It looks different in home-based care. There is a routine: the natural routine of the family. And that is what builds stability for learning and curiosity. The desire to superimpose that center-based model creates unfair and unjustified burdens on the providers, and they don’t get appreciated for the incredible assets that exist in home-based care.”

Another problem with the existing subsidy system is the paperwork required for providers to accept funds. For a small, informal-care provider, the administrative burden can be too great. Ashli Carlock, a home-based provider in Nebraska wrote about the process in a : “It’s nerve wracking. You know you’re going to get paid something, but you don’t know what that will be exactly… You’re trying to calculate in your mind paying bills, keeping food stocked for kids, meeting your own personal needs, and paying a part-time employee.”

All Our Kin, Supporting Family Child Care Providers as Educators

Another group working to expand the role of family child educators is the Connecticut-based , a nonprofit that trains, supports and sustains family child care providers. “We built this organization to recognize that family child cares are left out of conversations and devalued,” said Jessica Sager, founder of All Our Kin.

Because family child care centers tend to be used and are , Sanger believes they have been devalued by systemic racism, which has rendered family child labor as worthless. “Children can succeed in any setting with stable, nurturing care,” said Sanger. That stable, nurturing environment isn’t restricted to the domain of child care centers, which can benefit from having more resources for reaching families.

What we need: better reimbursement rates, quality metrics and availability

Improving the current child care delivery system to meet the needs of more families and in more places will require improving the current reimbursement rates and availability of informal child care. Currently, informal care can vary widely from state to state with myriad licensing standards and subsidy reimbursement rates. For example, in Massachusetts, anyone watching a single, non-relative child in their own home requires a child-care license. In South Dakota, a caregiver can watch without requiring a license.

Additionally, both the quality metrics and subsidy reimbursements among states and informal care can vary widely. Renew has been outspoken for efforts to encourage decision-makers and others to recognize the value that home-based child care brings to children’s development, families and communities overall. A key way to support that care, she says, is to improve compensation for it.

There has been an influx of venture capital funding for innovations that make child care delivery more manageable and affordable, such as Wonderschool, Wee Care and Winnie, which connect families looking for child care with a provider. But while some may take into account licensed family-care providers, most are still concentrated on traditional child care delivery systems, particularly day care centers. While child care centers are an effective child care option for many families, they do not work for all families, especially those in child care deserts or those who work nontraditional hours. In addition, daycare centers often charge a set rate regardless of the number of hours used. For families that require only part- time or sporadic child care (such as those working unpredictable hours), the center-based care is not an ideal fit and .

To be sure, even an influx of home-based child care providers will not be enough without the shift in perceptions, quality standards and subsidy reimbursements that put such providers at a disadvantage. Elevating home-based providers requires a change in our country’s way of thinking about child-care delivery, and one that is immediately needed to support a growing workforce.

Read .

But in the past decade, demographics in the state house and attitudes around child care have drastically shifted, and Vermont is one of the first states to seize on that opportunity to push for universal child care. There are now state laws codifying a study on implementation and financing (likely paid for by an income task for the workforce). Innovators in the child care space are watching Vermont closely because their efforts have gotten so far in codifying universal child care into law through the state legislature. New Mexico, by comparison, is using executive action and giving to accomplish something similar.

that treating early care and education as a public good will benefit families, children, democracy and society. Vermont’s promising goals notwithstanding, our current national patchwork system still relies on an individualistic approach, where families are left to fend for themselves in finding and paying for expensive child care, early educators earn poverty wages, providers are underpaid and operate on razor-thin margins, and the quality of care suffers for young children at a time when their developing brains need it most.

While we have a way to go for the kind of public investment and public-private partnerships to make quality early care and education truly affordable and workable for all families, there is ample innovation in the field that stands to improve different facets of our child care delivery system. It’s a complicated problem with neither substantive federal investment nor a robust care infrastructure, building a high quality, universal early care and education system will require innovative and creative solutions. Right now, states are lone actors in making sweeping changes with little federal support or public investment. While private sector solutions are useful, they are not sufficient for widespread change.

This 5-part series will explore those innovative and creative solutions. Upcoming articles will focus on innovation, including diversifying types of child care to meet families’ needs; underserved communities; pay increases for early educators without adding costs to parents; and subsidies and provider payment models. This series will be part of a larger report on child care innovation slated for release by in autumn, 2022.

This following is not an exhaustive list of innovations. It is meant to illustrate select innovations for various pain points in the child care delivery system, absent further federal investment, and to inspire more action.

Building the Public Case for Child Care Investment

Vermont’s Push for Universal Child Care: In May 2021, after years of coalition-building, Vermont passed legislation to lay the blueprint for universal child care. Vermont still faces a major hurdle in funding the universal child care program. H.171 puts in place two studies: the first on how to make the program accountable and efficient, and to decide which agency will regulate it and how. The second is a revenue study, designed to map out the costs and payments. Yet this is the furthest a state has come to adopting universal child care into law. For states looking for an innovative way forward on child care, Vermont can serve as a blueprint. Read more about in this feature.

New Mexico’s Year of Free Child Care: In April 2022, New Mexico Gov. Michelle Lujan Grisham announced that the state will cover the costs of child care for the majority of its residents, up to 400 percent of the federal poverty level, through June 2023. According to estimates from , this new benefit will make child care free for 30,000 families. This makes New Mexico the first state to offer no-cost care over such a broad range of incomes. New Mexico has also expanded their subsidy program in innovative ways, to be discussed more in Part 5 of this series. Until then, read Bryce Covert’s article: “”

Supporting and Encouraging Private Investment in Child Care

serves as a nonprofit accelerator for entrepreneurs in the early childhood space. It has created a to showcase these innovations with the hope of drawing investment and attracting attention from policymakers, funders and journalists. The group also can collaborate and work with one another via a Slack channel. The goal is to get the early education and child care field to look like most other ones in terms of private investment, explained founder Matt Glickman.

is a private investment company that provides early investment to companies that fit within one of the three themes to support women and working families: career, care and consumer.

Are such innovations enough? These innovations can help spur funding and they can help individual states improve their child care options. But the national child care crisis is too large for a silver bullet solution, even one that has passed state legislatures or received generous Series A funding. (Series A financing refers to an investment in a company after it has shown progress in building its business model and demonstrates the potential to grow and generate revenue. It is considered seed capital since it’s designed to help new companies grow.)

“We cannot out-innovate our way out of paying workers $12 an hour,” said Elana Berkowitz, a founding partner of Springbank Collective. “We need every kind of investment and we need more of it: private investment, government investment, employer benefits. No one should have to shoulder the entire burden of this sector, which is utterly strapped.”

Investment helps. Even as fields such as health care and education have seen a thriving market for private funds for innovation, early child care has lagged behind. Groups like Promise Venture Studio and Springbank Collective, among others, aim to close that gap, create a thriving ecosystem for innovators, spur investment and use the accelerator process to make it happen quickly.

Private sector solutions require less political will and can be scaled to encourage more change nationwide. But private innovation cannot be the only answer. Research by Better Life Lab found that child care is too fragmented and complicated to be solved by a single innovation, no matter how well funded. Reliable, stable funding is crucial to keep child care operations open. This is true of both center-based and home-based care. The margins within the child care market are too thin for most providers to offer basic benefits, including paid family leave and paid sick days. For the majority of Americans who live in states that do not provide such benefits, the burden falls to the families who pay tuition and the care workers who go without.

Absent federal investment for universal child care, it will be up to states to lead the way, like Vermont and New Mexico, which have already acknowledged that quality, affordable and accessible child care is essential for their workforce and economy. such as New York, have drastically increased their budgetary spending on child care, and Connecticut lawmakers have advanced a state budget to include a one-time rebate of $250 per child, up to $750 per household. States that can demonstrate an effective universal child care system may become the blueprints for future state efforts, similar to the which started in a handful of states and has since grown to 11 states plus D.C.

But states can struggle to maintain funding streams to allow for universal child care, as states are required to balance their budgets and not take on a deficit, unlike the federal government. One of the first steps in creating a state-supported child care system is identifying the sustainable funding streams, said Elliot Haspel, author of Crawling Behind, and a top voice in child care and early education. “The states can’t just rely on American Rescue Plan Act money or the state having ‘a good budget year.’”

Haspel added, “States have traditionally been these laboratories of democracy, they serve that role well. With the political realities at the federal level, states have more of the burden to bear.”