The child care industry in the United States has been rocky, at best, since long before the COVID-19 pandemic. Scarcity of resources has led to too few child care providers and too few staff, making child care far too expensive and inaccessible for American families. Throughout the pandemic, new funding helped many states provide greater reimbursements to providers participating in the subsidy program. However, the state-determined subsidy rates for administering the Child Care and Development Block Grant (CCDBG) program are too low and are predominantly determined through a method—market rate surveys—that will never meet the real financial needs of child care providers. These surveys measure what providers charge at a single moment in time, which states then use as the basis for their subsidy reimbursement rates for up to three years.
The reliance on market rate surveys builds low wages, low benefits, and low capacity into the child care system going forward. In fact, data analysis has shown that the true cost of providing child care exceeds not only the reimbursement rates provided by subsidy programs but also the price charged to families.1
As of fiscal year 2022, 49 states were using a methodology that sets future maximum payment rates based on past market rates charged, making them unresponsive to market or economic changes. By the final year the payment rates are used, the underlying data could represent the child care market of up to five years prior.
There is,...
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