314: Is Childcare in Crisis? Understanding the Urgent Challenges Facing Providers Today

In this episode of Childcare Conversations with Kate and Carrie, it’s just Carrie at the mic, diving deep into the tough realities facing childcare in the U.S. She unpacks legal battles over subsidy freezes in five states, Head Start’s fight for DEI, and the ripple effects of payment delays and funding cuts. 

Carrie’s got practical advice and heartfelt stories, all with a dose of hope and resourcefulness. If you care about kids, families, or the future of child care, this one’s for you.

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Transcript

Childcare Conversations (00:09)
Hey, childcare is being hit from multiple directions at once. Federal fights, state payment cuts, and operational pressures on the ground. Right now, there is a lot going on in our industry and I just wanna talk about it. This is a childcare conversation between me and you. Kate is not here because these are the things I get fired up about and we did not have enough room or time to have both of us get on soap.

boxes. So let's talk about all the things that are happening from a policy perspective that are affecting your child care program and other child care programs out there. Feel free to write in, text the show, go into the show notes. There's a little button that says text the show. Give me feedback on what is most affecting your program and maybe we'll have a conversation about it. So let's go back to it.

federal legal fights, state payment cuts, and operational pressures. None of these issues exist in isolation. So this episode, we're gonna be talking about what is actually happening, not speculation, not fear-mongering, what is actually happening. Child care does not fail loudly. It erodes quietly, one payment delay, one closed classroom,

at a time. So let's start with what is for a lot of us the scariest bugaboo. That is the we're going to freeze all child care subsidies. And again, I want us to reframe this. So it's not that our business is subsidized. It's the care for our students that is subsidized. We don't say that a hospital is subsidized

because they accept Medicaid or Medicare. We're in the same situation as hospitals and doctors' offices that accept Medicaid and Medicare. We accept the Child Care Block Grant Fund payment for services we're providing. We have a contract with your state government, which is a relationship with the federal government, right? The state steps in.

as a proxy for the federal government. So we have a contract with the state to provide care for low income or student families, right? That's who the subsidy is for, is for people who are working or going to school full time. So we had this whole scary ⁓ thing happen right after.

⁓ A social media influencer went to Minnesota and said that there were childcare programs that weren't actually providing care because he couldn't get into the building because he didn't have an appointment and he was just knocking on the door and nobody would let him in, which is pretty standard practice in childcare in today's day and age. You have to have a code to get in or an appointment. That's pretty normal. You know that I know that, but not everybody who watched that

video knows those things. So then there was this whole uproar that maybe there's not actually childcare being provided in these buildings. And this set up a whole bunch of viral moments on the internet. And the government's response was to threaten to freeze all childcare funding of any kind through to the entire country. That was the initial threat.

that was then scaled down to five states. ⁓ Now, I'm not saying that there is no childcare fraud. What I am saying is that there is no evidence that's been presented in any court that there is widespread childcare fraud. So the five states that the federal government decided they would start with on this enforcement action were California, Colorado, Illinois,

Minnesota and New York. As soon as that paperwork came through, the attorneys general of those states, I think they were all attorneys general, sued the federal government and said, you can't do that. This is based on statute from the federal government and state statutes. So how is that lawsuit going? What's happening with childcare funding? Are those five states still getting childcare funding?

Will they indefinitely, is this gonna roll over into your state? We don't know all of the answers, but we do know some of them. We do know that there has been a temporary injunction. Now there's, we're on our second temporary injunction about this, stating that they cannot cease the funds without due process. And so they're going to continue through at least mid-

February. Okay. The states argued that the action was unlawful and exceeded the agency's authority because again, it was a law that was passed by the federal legislature. So there is a court order ordering the funds to continue to flow. February funds are expected to flow and March funds are likely but not guaranteed.

And in almost all states, they draw down the February funds are to pay for March payments. So if the February funds are coming down, then those states should have their subsidy payments for January, February and March. It's April that is in question, is my understanding. This is a temporary restraining order, a TRO. This is not a final decision in this case. We do not know

what will finally happen. This ruling is stabilizing care for the short term, but it is not removing the uncertainty. It's still month to month in those five states and the outcome of this lawsuit, the final outcome of this lawsuit will probably determine what happens in the other 45 states, the District of Columbia and other provinces of the United States like Puerto Rico and Guam, et cetera.

Okay, so we know that through mid February, this is going to continue and we're gonna continue to follow this lawsuit as it continues to roll through the courts.

Okay, so for 45 states, this is a time to breathe. For those five states, it's a time to get your water and get ready for a little bit more instability. If you are in one of those five states, this is the time to go to your bank and go get a line of credit so that you can weather this. We had some of these kinds of payment delay issues during COVID and if you had a line of credit,

you were able to make it through those who didn't have a line of credit or enough money in the bank account ended up closing while there were these temporary suspension of ⁓ benefits or of reimbursement, I guess is the better term. Let's go on to the next big legal case. The next big legal case is the head start.

So you may or may not have heard about this because most childcare centers are not part of the Head Start network. But Head Start is a program that was started ⁓ by President LBJ and his administration to provide childcare for low income and under-resourced communities. And this is for not when there's a few families who are there, it's when

Basically there's a neighborhood or a community that really needs the support. In some ways people think of it as a precursor to the voucher program, but it's very, very different. In any case, what happened was the anti-DEI orders from the executive branch said you can't use any of these words that talk about special categories in any of your paperwork.

So you couldn't talk about whether someone was male or female or what their ethnicity was or what their financial status was, which is a problem in Head Start because all of their funding and the whole purpose of the organization is based on some of those terms because they're serving low income and under-resourced communities. So they have to be referencing

special needs. They have to be referencing the financial ability or the, you know, households that are transient households or households that are a single adult household with, you know, 27 children in them, probably not 27, but maybe a single adult household with seven to 10 children. All of that has to be in their grant applications. But then the federal government said you couldn't use any of them.

And so that was a huge problem. ⁓ nonprofits that exist to support the Head Start mission, again, sued the executive branch of the federal government and said, you can't do this. And at this point, again, there has been a ruling that, yes, they cannot do that. So what had happened, what happened that

maybe you missed was that there was also a layoff of about 40 % of the administrative team ⁓ at the regional support ⁓ inside of Head Start. And another part of the judgment of the judge was that they have to halt all layoffs in the department. So it is

blocked for now. Again, we don't have a final resolution and this lawsuit's been going for almost a year. But there is a current resolution ⁓ stating that there has to be funding reliability and they cannot reduce the administrative capacity of the organization. So they're no longer in the compliance limbo.

and they can use those terms that identify which families and communities are at high needs and need to be part of Head Start. So they're able to do that going forward for what appears to be the rest of this school year. So that is good. And it means that there will be fewer families that are in a state of crisis because they had been Head Start, maybe they'd been Head Start families.

for years and years and now they thought that Head Start was closing and they were gonna come looking to your program for childcare, but if we don't have the childcare subsidy program, we're not gonna be able to help them either. So this is kind of a domino effect, right? So first the Head Start was going down and then the childcare subsidies was going down and it was gonna become, ⁓ I think a pretty big issue, but that one.

appears that ⁓ it's definitely calmer than it was. So what else is going on? If you are in a number of states, Oklahoma, Indiana come to mind for one, you've also seen that there, ⁓ Kansas, I think has another one, that there has been payment delays.

in your subsidy payments or other childcare payments. So it may have been your school readiness funds or your ⁓ subsidy payments have been delayed causing huge cashflow issues in those programs, which is of course leading to people dropping taking subsidies. So the funds were approved at the federal and at the state level.

So people are supposed to get paid, but the payments aren't coming out of the bank accounts. The checks aren't being cut. The drafts aren't being sent to the childcare programs bank accounts, which means that the childcare programs are having to pay the payroll, pay the rent, pay the mortgage, pay the electric bill, and they're not getting reimbursed for the services that they have a contract with their state.

that the state was supposed to provide those funds for the services. The state is very normal, you know, it's normal for a state to ask you to provide a service and then they pay afterwards as opposed to self-pay clients which pay first and then they get the services. So those childcare centers have been paying for the payroll, paying for the occupancy, paying for the curriculum, the supplies, expecting the government to pay them

as was in their contract and several states are just paying late. I've been in this situation, I had a government contract and they were two and a half years late paying me. This is a huge issue and again, makes it more likely that programs are going to stop accepting subsidies because

This has been a huge driver of closures. They have to close their business because they're owed tens of thousands of dollars from the state government that they have not received and they've already paid out tens of thousands of dollars to their employees, their landlords, the electric company, et cetera. So this has been a huge issue and

cashflow kills programs so much faster than any ideology can. So this issue is something that if you're in one of those late-paced states, you need to be talking to your legislatures, weekly, heck, if you can, hourly. Set up a ⁓ bot to send them an email once an hour talking about what's happening at your program.

because those legislators need to know that the state owes you money and that because they're not paying you, there are people who are not being able to go to work because their kids cannot be in care. And so the state not paying its bill, because that's what it is, the state is not paying its bills, is making it so that fewer people can work in your state, which is meaning that there is less revenue for your state.

so that they're gonna have more bills that they cannot pay. So, please, if you're in a slow pay state, let your legislators know as often as you possibly can. This one drives me absolutely crazy. So, we have all of these issues snowballing together. ⁓ wait, I forgot one. Another big problem is that many states

don't do, do not update their reimbursement rates often enough. They do it once every five years. They poll to see how much childcare costs. So what childcare costs in 2021 is in no way what childcare costs in 2025 because we've had the inflation. We've had the inflation of payroll between 2021 and today.

So childcare is more expensive today by a significant amount than it was in 2021. So the reimbursement rates are not keeping up with the current cost of providing care. And again, this is leading to more and more programs deciding that they're not going to accept subsidies, which means that we are creating situations where we have what are called voucher deserts. So.

voucher deserts. What does that mean? We've heard of childcare deserts where there aren't enough childcare providers in an area, in a zip code, in a neighborhood. What is a voucher desert? It's the same thing, but it is an area where there is no one providing care for low income families because programs are quietly stopping their voucher acceptance. Well, in some cases, not so quietly.

and the families qualify for the care, but they can't get care. Again, we've heard of this in the healthcare industry where there are parents, there are families that qualify for WIC or social security or Medicare or Medicaid, but there aren't any doctors who will accept social security, not social security, Medicare or Medicaid, right?

or ⁓ for veterans that will accept TRICARE. So there are parts of the country where veterans cannot get care without driving 10 hours to the local VA. And I say local, probably 10 hours is an exaggeration. Let's say three hours to the VA because there's no private care doctors who will accept payments from the VA because they're so much lower.

We're having the same thing in childcare where there are areas of the country where there are families who need care and who qualify for care because they are working full time, but they were working at low wage jobs. So they should be able to get help paying for their childcare. But your center, the center down the road, the registered family home in the neighborhood, they've all said, we're not accepting subsidies anymore because you're not paying anywhere near.

reimbursement rates that they need to and you're slow paying. So why would I take your money? And I think this is horrible because this used to be a way that you could diversify your student body and you could have low income families and high income families and the kids and the parents would get to know each other and it really made for a richer program. And now we're having

way more voucher deserts. Oklahoma and Indiana are big examples of this. Oklahoma has lost 20 % of their childcare programs since the subsidy rates were reduced. So in nine months, they have lost 20 % of the childcare programs. So a lot of them weren't just stopping taking subsidies.

they just closed their doors. So if 20 % of the programs closed their doors because of this reduction in subsidies, how many more kept their doors open but just refused to take subsidy kits?

People are exiting the system. They're exiting, working in this wonderful field where we can make the world better every day because a voucher is meaningless if a provider cannot afford to accept it because they don't know when the state is going to pay or when they're going to change the terms of the contract and say, I know that I promised I would pay you.

$240 for providing care last month, but now I'm only going to pay you $2 for that work you already did. That makes it completely untenable, completely untenable.

Here's where it gets even more dangerous in my opinion, is that in the school age part of our industry, it's even worse because the states, if they accept the federal childcare block grant funds, have to provide reimbursement for kids from six weeks to 12 years old. But there are...

governments that are going, okay, we know we've got to have those infants, toddlers, and we're taking a whole bunch of the preschoolers into the school system, but what if we just reduced the amount that we're paying for school age? Because back in the day, school age care wasn't necessary. Kids just stayed at home. So, and I believe it was Indiana, they reduced

the reimbursement rate down to $1. $1 was the reimbursement for school aged care. Not $1 an hour, $1 a week or a month. I can't remember which one it is a week or a month. I should have double checked that. Can you provide quality, can you provide anything for $1 a week for children between the ages of five and 12? You can't give them goldfish.

for a dollar a week, much less give them snack, give them support with their homework, supervise them, have them have a place to play. You can't do that for a dollar a week. And so what they are doing is making it so that children ages five to 12 are gonna go back to the latchkey situation, which I was a latchkey kid and I obviously didn't die.

But I was not at home by myself at five years old. I was not home by myself until I was eight. And in today's world, people are like, what, an eight year old at home for five hours in the afternoon by themselves? Yeah, I had a big brother, but he was never home. So that is something that they're setting up. this is, I am going to say this is a

an editorial statement from me. For people who say that their biggest concern is childcare safety and that we have to get rid of pedophiles and stuff like that, this puts children who are at the highest risk of being maltreated at a much higher risk. Children five to 12 are at much higher risk of all forms of child maltreatment than almost at any other age.

So you're going to put these kids so that they no longer have any paid people looking out for them and looking for the signs that they might be mistreated in the hours where their parents and their school teachers are unavailable. This blows my mind. Okay, back to actual facts. This is a workforce issue.

because there are going to be parents who are stepping out of full-time work and going to part-time work because they, like me, can't stand the thought of a kindergartner being at home by themselves. So we're gonna have a lot of employers lose their employees because they feel like their kindergartner or their first grader cannot be at home by themselves.

And they cannot afford to pay. Some of them cannot afford to pay for childcare. And we no longer live in a community where it is likely that there is a retired grandparent who can watch those kids after school. That's just not the society we live in right now. A lot of those grandparents are working too. And do you really want the 80 year old great grandparents watching the five to 12 year olds? So

Parents are gonna miss work, employers are gonna lose workers, and the children are gonna be left unsupervised. None of that sounds like a winning situation to me. So.

Those are some of the issues. And now I'm gonna talk about the one that is the most inflammatory. And there's no way to avoid talking about this, which is the immigration enforcement fear and the family instability that that creates.

We've got families that are withdrawing children suddenly because their children are brown or they are brown. So they may be from East Africa, West Africa, South America, Central America, various parts of Asia. But there are people who are withdrawing from the community to stay at home. There are reports of children who have been detained.

at their elementary schools and at childcare centers or registered family homes. I don't think there've been any at childcare centers, but there have been apprehensions of childcare teachers at childcare programs and head starts. So.

What do we do about that fear for those families? We can't tell them it's not a valid fear because it has happened. We can say at our building, no one can come in unless they have a code. We don't allow ⁓ police or law enforcement, law enforcement's the right word, into the main part of the building if.

law enforcement wants to come, we talk to them in the lobby or outside the building. We're not going to allow law enforcement into our building, but they'll go, well, what if they go onto the playground? I can't solve all those problems for you, but I feel like we have to be aware of this, that there are families in our programs who are going to be withdrawing or employees that ⁓

stop showing up to work because of this. I have a very good friend who is a third generation American, her grandparents ⁓ emigrated and became naturalized citizens, but she's still 100 % looks like ⁓ a person who emigrated from Central America. And so there are times and places she will not go currently because she's

heard that there is ICE enforcement in that area. And she is 100 % a citizen and her mother was a citizen and her grandparents were citizens. But she has that anxiety because there have been citizens who've been arrested, who've been detained, who've been deported. So it is a real fear and we can't deny that fear. That is their fear, that is what they're feeling. But even when the enforcement is legal,

The fear alone is destabilizing to your program. So be aware of that. Add that to all of these other things and the parent pressures and the hidden costs of having to have a substitute of co-pays not increasing appropriately of being in a childcare desert, being in a voucher desert.

All of these parent pressures and hidden costs are.

just compounding and compounding to make our industry more fragile than it's been in a long time. It is a death by fragmentation. It's got too many stresses and not enough funding and support.

So what are my suggestions so that you can make it through this? One, make sure that you are communicating with your state, city, and federal representatives, your city council members, your state legislators, your federal legislators. Let them know what the impact of cutting CCDF

TANF, CCBG, Head Start, et cetera, is on your community. Not just on your center, but on the community as a whole. Look at other ways that you can build in more support into your program. Are there nonprofits that you can bring in to help offer support to the families at your program? Be aware that when we have one wobble, everything is shaking.

there isn't a coordinated stabilizer unit. Our industry is either going to survive on duct tape and goodwill, or it's gonna fall apart. So right now it's time to get out the duct tape. And the duct tape is reaching out to other parts of your community and getting additional support for your employees and for your customers. And

being in as frequent a communication as you can with your regional, state, and federal lawmakers and tell them what is happening because they don't know. They don't know. They just hear the headlines. They don't know what's really happening. And you can tell a powerful story because you've got dozens of cute little kids whose parents are working

dozens of important jobs that they're not going to be able to work if you and the other child care programs around you close. So I know this was not an uplifting episode, but I really want you to just choose one or two things to do. Run a subsidy stress test. See how many kids you can afford to have in your program on subsidy.

if your state becomes a late paying state.

Ask the parents in your program if they are concerned about any of these issues we have talked about.

If you are considering letting go of subsidies at your program, let the parents know months in advance so that they have time to look for other programs that might continue to take subsidies. And if you're thinking about cutting back or stopping your subsidies, again, let your legislators know.

Let the policymakers know that stable payments matter so much more than their new pilot programs. If you want to know more about that, talk to me about Oklahoma. Just go into the show notes and hit text the show and say, tell me about these whole pilot programs in Oklahoma. I'll be happy to. Child care does not have to collapse.

It shouldn't collapse, but right now it's under as much stress as it was in 2020 in many states. Your state may not be one of those states, but it doesn't collapse all at once. It could disappear quietly unless we're paying attention. Even if your program is a hundred percent parent pay, what happens when

that place where all of your parents work starts to have a hard time getting entry-level staff. It does impact you. You're going to have people who are more stressed. Even if you're not part of the subsidy program or the Head Start network, it still affects you. All of this is a network of childcare designed to support our economy and to support our communities.

We have to know what is going on and try to make it a little bit better. And even if that's sending one postcard or one email to one legislator, please listen to me and listen to the creeks in the childcare system and send that one email or postcard. Okay. Please send in any of your concerns, questions.

to the show in the text, show that you can see in the show notes. And I and Kate will be back in a couple of days to talk to you again.