The Child Care Conundrum: Can We Curtail the Cliff?

This article is part of MACo’s Policy Deep Dive series, where expert policy analysts explore and explain the top county policy issues of the day. A new article is added each week – read all of MACo’s Policy Deep Dives.

The child care industry has existing significant issues, with seemingly more complex solutions. In fact, experts are calling the increasingly tumultuous situation the “child care cliff.” Maryland’s situation proves no different, with the combined forces of the COVID-19 pandemic and disappearing ARPA support, the Blueprint’s siphoning of private providers from child care to pre-K, and some of the highest industry costs in the country. Here, we dive into all of those factors and what Maryland is doing to combat them. Spoiler alert: the potential solutions are as complex as the issue itself and only time will tell whether Maryland can “curtail the cliff.”

The cost of child care in Maryland

Maryland’s “child care crisis” is further exacerbated by some of the highest industry rates of the entire country. The U.S. Department of Health and Human Services says for child care to be considered “affordable,” it should cost no more than 10 percent of a family’s total income. But in 30 states and D.C. — including Maryland — the average cost of infant, center-based child care is more expensive than the average college tuition.

According to the Economic Policy Institute, average infant care in Maryland costs more than $15,000 annually. Furthermore, new research from LendingTree shows that the overall cost of raising a child in Maryland from birth to age 18 now costs an average of $260,000, making Maryland the third most expensive state to do so. The average nationwide is now $237,000, “up drastically” from 2021 when the average cost was just under $22,000.

A local CBS News report does highlight, however, that these costs are relevant to regional context:

While the cost to raise a child is above the average here in Maryland, we also have a fairly high income area.

So the percentage of the income spent on childcare is less than what people in lower income areas in the country spend because they are still dealing with the same childcare costs.

The COVID-19 pandemic and steepening of the “cliff”

The COVID-19 pandemic exacerbated existing challenges in early childhood education — a shortage of quality, safe institutions, and industry professionals. In fact, according to ChildCare Aware of America, 9% of licensed child care centers closed between December 2019 and March 2021.

The American Rescue Plan Act (ARPA) provided almost $40 billion in federal emergency aid for child care nationwide. The funds went to helping child care providers pay for rent, lowering tuition rates for families, and increasing wages for industry workers. That aid is scheduled to end on September 30 of this year. Researchers predict that when that happens, “3.2 million children could lose their daycare spots as roughly 70,000 programs are expected to close, and 232,000 caregivers are expected to lose their jobs.”

Furthermore, the loss in tax and business revenue is predicted to cost states $10.6 billion annually in economic activity as millions of parents will have to reduce their hours or leave the workforce to care for children no longer in child care.

The Blueprint conundrum

The Blueprint for Maryland’s Future (“The Blueprint”) prioritizes early childhood education as its first pillar, including the gradual but eventual universal access to prekindergarten for 3- and 4-year-old children. Doing so is a monumental undertaking proving to offer both challenges and opportunities.

One potential consequence causing concern for many stakeholders is the impact of pre-K expansion on the child care industry. The Blueprint envisions a collaborative system of public-private partnerships for expanded pre-K. With more 3- and 4-year-olds moving on from child care facilities to pre-K — and with child care facilities entering the pre-K arena to help meet Blueprint goals — some stakeholders are concerned that there might not be enough providers (or seats) for natal-3-year-old child care.

The lack of child care slots isn’t unique to Maryland, however, with neighboring states also experiencing a scarcity of seats, according to a recent article from WTOP:

For starters, there aren’t enough spaces at existing day cares for more babies — especially in the D.C. area. In 2015, the District had roughly 7,610 slots at licensed care providers for the city’s 22,000 children under the age of 3.

In Maryland and Virginia, some parents put their names on waiting lists as soon as they find out they are pregnant — even before.

What Maryland is doing

Maryland has enacted substantial measures to stabilize the child care industry post-pandemic and ahead of Blueprint pre-K expansion. During the 2022 legislative session, MACo supported a child care stabilization package (which ultimately became law) that included measures like:

  • Providing financial aid for existing licensed child care providers and grants to incentivize new providers to come into the market; and
  • Providing new hire and retention bonuses for child care providers and employees.

The Maryland State Department of Education (MSDE) has administered two rounds of stabilization grants totaling $285 million of federal funding. Federal funds are now exhausted; however, the State extended its Child Care Stabilization Grant Program and added $50 million in additional funds to provide additional relief to licensed child care providers.

Furthermore, Maryland — like Louisiana and Missouri — is also funding early childhood education through the state’s revenue from sports betting.

However, these significant advances in supporting the industry have largely stalled, with bills to expand industry recovery grants failing in the 2023 session. Furthermore, the State’s shaky economic outlook does not bode well for any legislative measures to deepen financial support for Maryland families or child care providers during the upcoming 2024 legislative session.

Stay tuned to Conduit Street for more on child care and Maryland’s struggling industry.