To return the supply of ECE slots to pre-pandemic levels, state and local decision makers can use pandemic recovery funds, such as those from the American Rescue Plan Act (ARPA), to assist providers that have yet to reopen or continue to face severe financial constraints. Maryland, for example, distributed $155 million worth of Child Care Stabilization Grants to licensed and registered ECE providers across the state to help ease the financial burdens and operational challenges they faced during the COVID-19 pandemic.

Sustained investments in wages and benefits are useful for retaining and attracting more workers to the ECE sector, and such investments ensure that compensation is commensurate with the skills and knowledge required of early education professionals. Research shows that in ECE facilities where providers earn higher wages and have higher retention rates, children spend more time engaged in positive interactions and developmentally appropriate activities.

Immediate recovery efforts can focus on providing additional support to improve the current working conditions of the ECE workforce. For example, New Mexico implemented a monthly bonus of $700 for ECE teachers who continued to work throughout the pandemic. These supports, along with increased compensation, expanded affordable professional development opportunities, and mental health supports, can encourage retention of ECE workers.

• Base Subsidy Payments on Enrollment, Rather than Attendance
  Many child care providers rely on subsidies from the Child Care Development Fund (CCDF) to cover operational costs. However, in most states, CCDF payments are based on child attendance, not overall enrollment. This caused additional hardship for many ECE providers, who have experienced increased rates of absences due to illness or family preference during the COVID-19 pandemic. Basing CCDF payments on enrollment, rather than attendance, as nineteen states have done, provides needed financial support and stability to ECE providers participating in subsidy programs.
• Update Subsidy Rates
  In addition, modifications to overall subsidy rates can alleviate pressures on the sector. Subsidy rates and market rates do not reflect the true cost of providing high-quality early care and education, yet most states continue to base subsidy rates on market rates for ECE providers. But pandemic recovery funds offer an opportunity to improve the ways in which subsidy rates for child care are determined. New Mexico, for example, has implemented a new cost-estimation model based on the actual cost of providing high-quality care.
• Use a Contract Model to Promote Stability
  Alternatively, using a contract model, rather than vouchers, can provide more financial stability and predictability to ECE providers by providing funding for a set period of time. Under a contract model, providers are guaranteed spaces for children, associated reimbursement, and can more directly support higher workforce compensation than increases in subsidy payment rates. For example, during the pandemic, California used Coronavirus Aid, Relief, and Economic Security Act (CARES Act) funding to continue to pay contracted slots and found that those ECE programs benefitted from the stability of being able to fully close in-person services, yet retain staff and provide distance learning and staff development opportunities.

The pandemic presents an opportunity to rethink how ECE is governed and funded. Currently, multiple state agencies and departments are responsible for governing the ECE sector. Funding for ECE comes from multiple levels of government and, in some cases, different agencies within the same level of government. Coordinated ECE governance and harmonized funding systems can support continuous quality improvement by enhancing quality, service provision, and accountability. Mechanisms for improving coordination across the sector include:

• Using recovery funds to establish partnerships between ECE providers.
  Partnerships in the form of shared services alliances and family childcare networks allow smaller centers and family providers to combine resources, pool shared administrative staff, share professional development offerings, and purchase bulk supplies.
• Centralizing and integrating funding streams.
  Streamlining and aligning grant processes, such as consolidating grant applications into one application, could provide a foundation for a more coherent and effective future ECE system. For example, the EarlyLearn NYC grant allowed providers to apply for CCDF, Head Start, New York State’s Universal Pre-K program, and a city tax levy with just one grant application.

Integrated data systems can help the ECE sector engage in rapid-response planning, provide access to real-time information to providers and families, identify gaps in services and supply, identify financial challenges, and track outcomes, all of which could support the sector’s response to another disruptive event. States like Kentucky have used ARPA funds to invest in ECE data systems, including upgrading their technology and creating an integrated data system. Such systems can help states to identify ongoing challenges in the sector such as the ones presented by the COVID-19 pandemic, but also promote accountability and quality improvements.