Effects of Child Care Provider Grants: Evidence from Six States

• In Event: Empirical Evidence on Child Care Supply and the Child Care Workforce

Abstract

Federal, state, and local policymakers have a growing interest in policies that provide public funds directly to child care providers, such as grants, contracts, and loans aimed at expanding supply without conditioning receipt of funds on serving a particular child. This contrasts with demand-side subsidies, such as vouchers, where funding follows the child. The American Rescue Plan Child Care Stabilization Program provides a salient example, allocating $24 billion in direct-to-provider grants that reached more than 220,000 providers nationwide. Many states continued similar grant programs after American Rescue Plan funds were exhausted, often modifying allocation rules and funding formulas across rounds.

Using administrative data on state child care provider grants from six states (CT, OH, MA, MN, NM, and NY), linked to Census administrative datasets—including the Longitudinal Employer-Household Dynamics, Longitudinal Business Database, and Integrated Longitudinal Business Database—we study the effects of these grants on provider outcomes such as total payroll, revenues, employment, closures, employee turnover, and employee earnings.

We estimate causal effects using quasi-experimental designs, primarily regression discontinuity designs that exploit features of states’ grant allocation rules and funding formulas. These features include step-wise funding thresholds based on provider licensed capacity, additional bonuses for providers located in disadvantaged areas defined by the Centers for Disease Control and Prevention Social Vulnerability Index (SVI), and rubric-based scoring systems used to allocate limited funds. Even within a given state, these programs often generate multiple distinct quasi-experiments arising from discontinuities in funding formulas across thresholds, rounds, and scoring rules. The implied treatment amount varies substantially, with discontinuities corresponding to funding increases ranging from roughly $100 to over $1,200 per licensed capacity.

Finally, we synthesize these estimates across programs using meta-analysis methods to provide evidence on the overall effects of direct-to-provider child care funding and how these effects vary across settings, provider types, and policy designs.

Author

• Ethan Jenkins, W. E. Upjohn Institute for Employment Research
  Presenting Author