By Grace Vitaglione
Child care took center stage at the legislature this past year, as advocates sounded the alarm about potential closures and/or price hikes when federal funding dried up in July. But the issue of affordable and accessible child care has been around for far longer. Public funding for child care in North Carolina stagnated for a decade before the pandemic.
That’s part of why the sector’s in crisis now, advocates say.
“This has been a problem that’s been smoldering for over a decade, and the pandemic threw gas on it, and now we have a crisis,” said Sherry Melton, lobbyist and consultant for the NC Licensed Child Care Association.
In June, state lawmakers agreed at the last minute to direct about $67 million to keep child care providers afloat for about six months. House Speaker Tim Moore (R-Kings Mountain) said at the time that the rest of the funding would come through in January.
“When it comes to child care, this is a key thing that we need to fund because we know we need a workforce,” Moore told reporters in June. “There are mostly women that are affected by this, but some men as well who cannot enter the workforce because they cannot afford or do not have access to child care.”
But this week, though lawmakers have been back in Raleigh to do a budget update, child care has not been on the table.
Most states, including North Carolina, primarily support child care with federal funds and supplement it with state money, Melton said. But neither federal nor state dollars have kept up with higher costs. In recent years, funding increases from North Carolina’s lawmakers have been “incremental and gradual and not enough,” she argued.
But some states do a better job than North Carolina in accommodating the growing cost and need for child care, mostly by dedicating funding to keep child care centers afloat and changing reimbursement rates and criteria.
Variable funding over time
Public money for child care in North Carolina usually flows into specific programs. This ensures that child care providers have multiple avenues for support, according to Ariel Ford, who just stepped down as the director of the Division of Child Development and Early Education at the N.C. Department of Health and Human Services.
Some of N.C.’s child care programs include:
Smart Start, or local-level child care support across the state, established by former Gov. James B. Hunt and the legislature in 1993.
Child care subsidies, which help eligible low-income families pay for care.
Infant-Toddler program, led by the Early Intervention section of DHHS, which helps families and their children from birth to age 3 who have special needs.
More at Four, which became NC Pre-K, started in 2001 to provide money for preschool programs for eligible 4-year-old children.
There hasn’t been a large state investment in early childhood education since the early 2000s, Ford said. And while federal money has increased, she said it’s not increased nearly enough.
In the 2011-12 biennium, when Republicans took over the state legislature, leadership said that one of their main priorities was to cut spending, as reported by multiple outlets at the time. The state legislature overrode a veto by then-Gov. Bev Perdue and made around a 20 percent budget cut to Smart Start and NC Pre-K (then called More at Four), EducationWeek reported.
That was the beginning of flat funding in the state for child care, Ford said.
For example, Smart Start saw a cut of more than $30 million in the budget appropriations from 2010-11 to 2011-12, according to the organization’s 2012-13 annual report.
Provided by Smart Start.
Having multiple sources of child care subsidy, and differing eligibility criteria, can be complicated. Smart Start Chief Strategy Officer Safiyah Jackson said it can be difficult for parents to figure out where and how to access help, but that Smart Start can serve as a “lighthouse” to direct them to resources in their community.
Mostly flat budgets
Smart Start is a comprehensive approach to early childhood from birth to age 5, Jackson said. It’s primarily funded by allocations from the state legislature, with some private dollars added on — usually about a 15 percent match. The program is not just child care support, it also includes things like child and family health programs. Most of their funding does go to early childhood education.
What also is confusing is that the term “Smart Start” refers to the network as a whole, which is made up of the NC Partnership for Children — a statewide agency — along with 75 local, county-based partnerships with independent nonprofits that help children.
The statewide organization distributes funds among the county-based partnerships, as well as provides support and oversees the local partnerships, Jackson explained. Legislation requires Smart Start to spend 70 percent of its budget on early child care and education, with the rest going to functions such as family support, child and family health programs or local systems building.
The local organizations are public-private partnerships that raise money of their own in addition to the state money they receive. The state budget instructs them how much they have to raise in matching dollars and sets limits on what they can spend on administration.
About half of the overall Smart Start network’s budget goes to subsidies to help families pay for child care; each local partnership distributes those dollars within the community, Jackson said. That’s separate from the state child care subsidy program, which goes through the DHHS Division of Child Development and Early Education.
State dollars for early childhood education have remained largely flat for a decade. Credit: NCGA Fiscal Research Division
From the years between 2011 and 2023, the state budget allotment for child care subsidy programs stayed roughly around $110 million, according to data from the legislature’s nonpartisan Fiscal Research Division provided to NC Health News by lawmakers. In the past fiscal year, that number ticked up by about $30 million.
State funding for child care capacity building, including Smart Start-related activities, has hovered around $52 million since 2011-12, according to the Fiscal Research Division data. Those dollars include tuition reimbursement for early education teachers, as well as assistance for child care facilities to increase or maintain their star rating level. There’s other Smart Start funding that goes to child and family health programs, family support and other forms of local child care support.
During the dark days of the pandemic, funding for child care was a rare bright spot. Typically, federal support for child care to North Carolina runs at about $400 million a year, but that grew to about $1.3 billion a year as a result of the American Rescue Plan Act, Ford said.
Those funds allowed the centers to bump up teacher pay, hire more teachers and even provide people with benefits, sometimes for the first time.
More recently, state lawmakers prioritized more funding for child care. In fiscal year 2024-25, lawmakers increased the state budget for the child care subsidy program to $150.5 million, according to the Fiscal Research Division.
State lawmakers also directed almost $1 million in funding to the NC Tri-Share Child Care Pilot Program in 2023, in which employers, eligible employees and the state equally split the price of child care for working families. That’s becoming an avenue for some families to apply for a child care subsidy, but the pilot is only available in select counties.
Facing a cliff
But those extra federal dollars for child care came to an end this past summer, prompting something of a crisis for many child care centers.
The end of those dollars prompted a flurry of advocacy activity this past summer, where providers, parents and business leaders all pushed lawmakers for money to maintain child care funding.
State lawmakers responded with an additional $67.5 million to make up for some disappearing federal pandemic-era dollars. According to advocates, it wasn’t nearly enough.
Lauren Horsch, spokesperson for Senate Leader Phil Berger (R-Rockingham), wrote in an email that the state “would not be in this situation had Congress not pumped tens of billions of dollars into states and then pulled the rug out from under them.”
“Addressing the childcare needs in North Carolina is going to take more than just money, and simply having the government subsidize childcare is not a long-term solution,” she said. “Conversations about the role of the business community and any potential policy solutions will undoubtedly take place as legislators prepare for next year’s long session.”
Some states started increasing their investments into child care, such as increasing subsidy reimbursement rates and giving child care teachers better access to care for their own children.
The population of children aged 0-4 in N.C. increased from over 543,000 to about 596,000 from 2000 to 2023, according to data from Carolina Demography. While the number grew overall, there was a big rise in the number of preschoolers in the 2000s which slowly drifted down.
The needs of young children with mental, emotional and behavioral challenges have increased along with the cost of care, Iheoma Iruka, professor in the Department of Maternal Child Health at UNC Chapel Hill, wrote in an email. She also pointed out that young children are often undercounted in the census.
“Just doing a flat line investment is not going to keep things open, given the cost of everything that we have here, particularly for child care providers and the workforce costs,” she said.
The recent drop in the number of children doesn’t justify flat funding when services — especially property and labor in N.C. — have increased in cost so much, Melton echoed.
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