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When the pandemic threatened to shutter child care centers and their enrollment was sporadic and unreliable, many used federal emergency funds to keep their doors open. Aid from the most recent of the COVID-19 aid programs – the American Rescue Plan passed in 2021 – likely prevented 75,000 centers from permanently closing and preserved 3 million child care slots, according to researchers at The Century Foundation, a think tank.

But a portion of those funds will start expiring in just a few months, and the rest will dry up by September 2024.

Late last year, as it became clear federal emergency funds would not be renewed, New Mexico surprised the nation by becoming the first state to amend its constitution and create a permanent child care fund, spending $150 million a year to make child care more affordable and boost pay for workers. Before that move, New Mexico was known as a state that historically underfunded its child care systems and lagged in national rankings for quality.

New Mexico’s success did not happen overnight. Advocates had been pushing for systemic change to child care funding in the state for more than a decade. Political willpower, in addition to the pandemic’s spotlight on child care, made the timing ripe for the historic change, said Tiffany Ferrette, senior policy analyst for child care and early education with the Center for Law and Social Policy.

“Childcare is something that a lot of folks have cared about for a long time, on both sides of the aisle. It’s always been a bipartisan issue,” Ferrette said. “It does vary state to state, but that political piece really is something to think about.”

After the pandemic laid bare the industry’s precarity, New Mexico’s move has renewed hope among some child care advocates that even states without a long history of state-funded child care — such as some states in the South — might be willing to invest in the sector.

“This idea that additional funding really can produce fantastic results that are meaningful and important has helped a number of people across the country, and across the South, to really think deeply about how to set up processes to make sure that continues,” said Max Altman, director of research and policy with the Southern Education Foundation.

Faced with a federal funding cliff, some states have begun proposing new sources of revenue to pick up the slack when the pandemic funds run out. But some of the proposals face hurdles of their own.

In Tennessee, legislation to use tax revenue from sports betting for child care drew support in Senate and House subcommittees before it was deferred to the start of the 2024 session. Currently, 80 percent of tax revenue from sports betting goes to the state’s education lottery account for higher education scholarships. The bill would divert much of that money into Promising Futures, a child care scholarship program that would pay up to $4,500 in child care fees per child per year. Because sports betting has only recently been legalized in many states, Altman said it could be a good source of new revenue to dedicate to child care.

“There are a couple of different southern states who have thought a bit about pulling in money from betting. In Louisiana, 25 percent of their sports betting goes to the Louisiana Early Childhood Fund, which gives dollar for dollar matches on [early-childhood education] investments,” Altman said.

In North Carolina, Gov. Roy Cooper, a Democrat, proposed $500 million in child care stabilization grants in his 2023-25 budget after legislators initially requested $300 million. A subsequent budget released by the state’s House of Representatives, however, adds some funding for subsidies but does not include the $300 million requested by the child care caucus, according to EdNC. The state Senate has yet to approve its version of the budget; leaders from both chambers will negotiate a final package to send to Cooper.

Outside the South, Missouri child care advocates are pushing for legislation that would allow three different child care tax credits – one that would allow taxpayers to claim up to 75 percent of their contribution to a child care provider as a tax credit, one that would provide a tax credit to businesses that offer child care to their employees, and another that would allow child care providers to claim a tax credit based on their withholdings and expenditures. But the legislation faces steep pushback from some legislators, the Missouri Independent reports.

In Minnesota, state legislators appear poised to pass significant boosts to child care and early education funding that would increase subsidy rates and expand tax credits, among other initiatives, according to the Minnesota Post. And Minnesota is a state with strong advocacy and potentially the political willpower to do it, said Ferrette, of CLASP.

Ultimately, some child care advocates hope the legislative discussions will result in more investment in an industry that has struggled with low funding for a long time.

“There’s a real opportunity for partnerships that are innovative and creative,” Altman said.

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