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The state Senate’s budget proposal, released Monday night, would allocate funding for North Carolina’s child care subsidy program, which helps low-income working families afford care. It also would direct federal funding to create a pilot aimed at expanding child care capacity in three counties.
The subsidy funding would increase rates for some programs participating in the subsidy program, depending on the program’s location, what ages of children it serves, and its quality rating. In some cases, programs would receive the same amount of funding they get now.
The proposal would allocate for each year $35 million in new recurring state funding, along with $45 million in federal funding, to update the rates that programs receive from the results of a 2021 study to those of a 2023 study. It does not include a subsidy floor, a policy priority of several advocacy groups.
Several advocates and state officials have pushed for subsidy funding so that participating programs can pay teachers more and families can more easily access and afford child care. Because of poor wages, programs have been struggling to recruit and retain teachers. The last of pandemic-era stabilization funding was disbursed in March, and experts are concerned about dwindling access and higher costs for parents.
“The reimbursements that they’re getting are not coming close to what it really costs in this day and age to recruit and retain their workforce, especially as the child care teacher compensation grants have ended,” said Greg Borum, director of the WNC Early Childhood Coalition, an advocacy group, in an interview with EdNC.
The differences in subsidy rates between 2021 and 2023 for different settings, ages, and ratings in each county can be found starting on page 58. The state sets the subsidy rates at the 75th percentile of the market rates.
Democratic Gov. Josh Stein’s budget proposal includes $88 million recurring for updated subsidy rates, plus $530 million per year on three tax credits for working families, among other early childhood investments.
The House will release its proposal next. Then the two chambers, both with Republican majorities, will work toward a compromise budget.
Why do advocates want a subsidy floor?
The Senate proposal does not establish a subsidy floor, another term for a minimum rate per child. A floor would mean that no program, regardless of location, would receive less than the state average.
This would get rid of what some advocates and providers call “the rural penalty,” the lower rates that programs in rural communities receive.
“We still believe that a market rate floor is the best way to support our western counties with the child care subsidy program and would both create fairness across the western counties in the reimbursement rates, as well as lifting them up closer to the cost of care,” Borum said.
A floor would help programs in low-income communities stay open and retain teachers, said Candace Witherspoon, director of the Division of Child Development and Early Education (DCDEE), at the first meeting of Stein’s Child Care and Early Education Task Force this month.
It would cost $216.7 million in recurring funding, Witherspoon said.
More on child care requests and proposals
DCDEE contracted with the American Institutes for Research (AIR) to conduct a study to find a different way to calculate subsidy rates. The study found that the funding differences across counties are wider than place-based cost differences.
The researchers also found that the market rates, or the tuition rates that programs charge families, are an indicator of what families can afford instead of the cost of providing care.
The current rates cover about half of the actual cost, Witherspoon said.
The federal government, which provides most of the funding for the program, began allowing states to come up with rate-setting methodologies in 2014 other than conducting market rate studies every two years.
DCDEE’s vision is to eventually adopt rates that reflect the actual cost of care. Witherspoon said that would require about $500 million in additional funding, which would double the cost of the program. For context, the Senate budget would spend about $19 billion per year on K-12 education.
Dolly Parton’s Imagination Library
The budget proposal also would allocate $2 million in recurring funds for 2025-26 and $2.5 million in recurring funds for 2026-27 to the North Carolina Partnership for Children (NCPC) to implement Dolly Parton’s Imagination Library, a program that delivers monthly free books to registered children from birth through age 5.
According to NCPC’s website, the organization had to stop enrolling new children in February because it had run out of state funding.
“NC Partnership for Children will continue to work hard to secure additional funding to resume statewide enrollment and to expand our overall literacy impact,” the site says.
Child care expansion pilot
The budget also would direct $3 million in each year of the biennium in Child Care Development Block Grant funding to be spent on a pilot program in Alamance, Harnett, and Johnston counties to increase the counties’ family child care capacity.
Licensed family child care homes (FCCHs) are child care programs that operate in a provider’s residence. The majority of licensed programs that have closed in recent years have been family child care homes.
More on family child care
The proposal says that the councils of governments in each of those counties would select a third-party vendor through an RFA (request for application) process to coach prospective child care providers through the process of setting up a child care program. The vendor would also create a two-year mentorship program to help with retainment of those providers.
The proposal says vendors must have experience in establishing family child care homes in at least three other states and rural areas, and be able to do so in six months or less. It also says the vendors must have experience operating a substitute pool in another state and technology that connects families with providers and includes billing and coaching functions.
It says each vendor must conduct a needs analysis, recruit new providers to create new slots, and create a local substitute pool. Each vendor also must create an “implementation strategy” to meet local workforce needs and establish child care for nontraditional hours if needed. They also must provide marketing services and other support and resources to family child care providers.
