Taming the country’s highest child care costs

Originally Appeared in the Boston Globe
By The Editorial Board

April 16, 2024

The COVID-19 pandemic highlighted the vital role child care plays in society. Without child care, parents can’t work. High-quality child care gives children a boost when they start school.

Yet child care is expensive — especially in Massachusetts, which boasts the highest costs in the country.

Still, providers are paid too little, leading to high turnover. The mean wage for a child care worker in Massachusetts is among the highest in the country, according to the US Bureau of Labor Statistics, but still only $40,600.

There is a need for public investment in child care, and the Commonwealth Cares for Children grants, first funded by the federal government during the pandemic, have been a game changer. According to the Department of Early Education and Care, money distributed to more than 7,000 providers stabilized the field post-COVID. Today, there are 7,100 more child care spots than pre-pandemic. More than 1,100 providers, mostly family child care providers, reported in a fall 2023 EEC survey that they would close without the grants.

Governor Maura Healey and lawmakers are discussing making the grants permanent, and they should. But the program must be structured in a way that ensures it is financially sustainable, and the way to do that is to prioritize the most vulnerable children and the most vulnerable providers.

Fiscal stability is already a problem. The grants started in July 2021 with federal money, which has dried up. The Legislature funded the program in fiscal 2024 with $475 million in state money. But the department didn’t budget for new providers opening, and the money was projected to run out before the end of the fiscal year. So the department instituted mid-year cuts, and some providers are losing up to 75 percent of their planned grants this May and June. (The state made fewer cuts to providers who take state-subsidized children or are in poor communities.) Imposing cuts mid-year harms providers who budgeted based on their original grant.

Budgets proposed by Healey and the House Ways and Means Committee would fund the program at $475 million next year, and the Senate, in its own child care bill, also supports continuing the grants. This would make Massachusetts the only state to continue funding C3 grants at the same level the federal government did.

Continuing the grants would make a strong statement about the importance of child care. But they need to be distributed in a way that uses limited state dollars effectively. The C3 funding formula has historically been based on a center’s capacity and staffing costs, with an equity adjustment for providers in historically marginalized communities or serving low-income children.

That has meant for-profit, multi-state chains can get grants — something both House and Senate proposals would limit. State data show that Bright Horizons, which in 2022 earned $2 billion in revenue, received $10 million in C3 grants in fiscal 2023. KinderCare, reporting $7.8 billion in revenue, got $5.4 million. Large chains are a vital part of Massachusetts’ child care system, serving thousands of families at all income levels and providing important services like backup child care. But they also have business models that allow for more profit than smaller providers.

The House budget proposal would establish a tiered formula for how the money is divided, reserving around half the money for providers where at least 25 percent of children receive state subsidies. While the goal — giving more money to providers who serve needy children — makes sense, the tiered system could have unintended consequences. If more providers start taking subsidies in order to qualify for the higher grants, but the overall pot of money doesn’t change, that would lower subsidized providers’ grants.

The Senate bill envisions a formula change to consider myriad factors including enrollment, costs, business structure, quality, children’s demographics, employee compensation, and financial aid. Crafting this formula is a good goal but would take time and additional data. For example, today, there is no way to compare program quality. The state uses quality metrics to evaluate programs that take state subsidies but not private pay programs. Quality is key: Providers that offer high-quality early childhood education give kids a head start in elementary school.

One short-term solution may be to develop a formula for next year that is similar to the previous one but tilts more strongly in favor of providers who serve the most needy children and who most need the money. The department could then collect data and develop a framework for modifying the formula that accounts for other factors, like quality and price.

Making the grants permanent is a good thing, and could lay the groundwork for future expansions. The challenge will be doing so in a way that incentivizes the kind of care the Commonwealth wants to have: high-quality child care that is affordable, accessible, and pays providers a living wage.