Federal funding will not end the Minnesota childcare crisis

With the passage of the American Rescue Plan Act, the United States childcare industry is looking at roughly $40 billion in federal funding. Minnesota will receive $550 million from the bill.

According to a report by NBC, the bill

…includes $15 billion allocation for child-development block grants, a $1 billion allocation for the Head Start early education program, and a $24 billion stabilization fund for child care providers. The stabilization fund money, which would be distributed at the state level, would provide funds for child care providers to deploy for a diverse array of uses.

Supporters said it was critical that the industry get a pool of dedicated funds, since a significant number of these facilities operate with few staff and on shoestring budgets, which left many unable to access the Paycheck Protection Program or other sources of Covid-19 relief funding because they lacked the overhead or operational staff to complete the paperwork-intensive process.

Social distancing rules, in addition to sanitation requirements, have indeed hurt the childcare industry. States, including Minnesota, significantly reduced allowable capacity for providers, reducing revenue at a time when their costs skyrocketed due to higher cleaning costs. In this case, funding might be necessary to mitigate some of those negative consequences.

However, legislators should not lose sight of the fact that Minnesota’s childcare woes predate COVID-19. Increased funding will do little, if anything, to address pre-existing issues, which happen to be chiefly caused by government regulations. Increased funding will only shift costs to taxpayers, without addressing the true cost of the crisis.

If lawmakers want to sustainably transform the childcare industry, they need to focus on the rules that raise prices and make it hard for providers to operate.