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Kentucky’s child care sector faces crisis as pandemic-era federal aid ends

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Child advocates say state leaders need to allocate more funding for child care facilities to stave off service cuts.

Kentucky’s child care providers warn they’ll have to cut pay, increase tuition rates or even close their doors without significant investments from the state as federal funding expires.

Kentucky’s child care centers are in trouble.

Since the COVID-19 pandemic, centers across the state have been supported by millions of dollars in federal funding. The majority of that money — about $470 million — was allocated towards quarterly payments to child care providers from 2021 to the end of 2023.

“Without these funds, we would have definitely had to cut programming, but most likely we would have been closing our doors,” said Krista Hughes, the director of a child care program in Kenton County.

Now, as the funding is set to end, child care providers say they’re in dire need for state leaders to fill the gap. The looming shortage could mean a crisis for Kentucky’s families and economy, according to a recent survey of nearly 800 child care providers who said they’ll be forced to raise rates, layoff workers or close their program altogether.

“Without this funding, the pressure on our child care providers, families and employers will become a workforce crisis with ripple effects that will impact our economy immediately, and the health and development of our youngest Kentuckians for the rest of their lives,” said Emily Beauregard, executive director of Kentucky Voices for Health, a nonpartisan nonprofit that published the study along with the nonprofit Kentucky Center for Economic Policy.

Graph showing results of child care survey
Kentucky Center for Economic Policy/Kentucky Voices for Health

To replace the federal aid that’s ending, the Kentucky Cabinet for Health and Family Services says state leaders would need to invest $330 million per year. Kentucky lawmakers are currently deliberating on the next biennial budget, but advocates worry that it will fall short. In his December budget proposal, Gov. Andy Beshear proposed an allocation of $141 million over the next two years.

In a press call Wednesday, several child care directors said they’re already feeling the effects from the loss of federal funding. Hughes said she had to make a tough decision between raising tuition rates or cutting pay for her staff. She ultimately decided to raise tuition rates by 5%.

“I believe that if I walk back pay, I'm gonna be walking my employees out the door,” she said.

Dustin Pugel with the Kentucky Center for Economic Policy said the federal stabilization payments were crucial in saving Kentucky’s long declining child care sector four years ago, which lost about 1,700 facilities between 2012 and 2020.

And Pugel said the General Assembly has the funding to make big investments this year. The state is estimated to have $5.2 billion dollars in its rainy day fund by the end of the fiscal year due to underspending.

“Legislators could fund the entire cliff — all $330 million — and still have a lot of leftover recurring funds to invest in our other priorities,” he said.

The Kentucky House of Representatives voted Thursday to pass a two-year budget plan, which allocates $70 million towards child care from the General Fund. The Senate will discuss and craft their own version of the budget bill in the coming weeks.

In a legislative committee meeting in January, Republican Senator Danny Carroll said this is an investment the state has been lacking for a long time. Carroll is CEO of a nonprofit which operates a child care center.

“It's time for the state to step up and to make the investment that we need,” he said. “And I think the dividends are going to be tremendous as the years go by if we take these steps.”

Chart detailing survey responses.
Kentucky Center for Economic Policy/Kentucky Voices for Health

For many advocates, this funding is about more than just keeping centers open — it’s about building generations of thriving children and bolstering the community.

“Access to child care is a social determinant of health, just like access to healthcare, healthy food, and safe and affordable housing,” Beauregard said.

Access to early childhood education leads to increased educational attainment, higher earnings and better health, and it decreases the risk of neglect, disability, chronic illnesses and incarceration, she said.

Beauregard said the state has to treat child care like an essential service and build the infrastructure to sustain the child care industry long term.

“This is the industry that supports all industries. So we need to see it as a societal benefit,” she said. “If we want people working and contributing to our communities, we have to have child care available.”

Jasmine Demers is an investigative reporter for LPM covering youth and social services. She is a corps member with Report For America, a national service program that places journalists into local newsrooms. Email Jasmine at jdemers@lpm.org.