Daycare Business Owners & The American Rescue Plan Stimulus

Two preschool girls playing blocks at a childcare center

This post provides important information for daycare business owners.

In March 2021, President Joe Biden signed the American Rescue Plan. The plan provides $1.9 trillion in total economic stimulus to help the American economy recover from the coronavirus pandemic. 

Notably for childcare owners, the plan includes $40 billion in stimulus for the childcare industry. During the summer of 2020, 86 percent of childcare providers said the pandemic harmed their enrollment and 70 percent said the pandemic increased expenses.

The stimulus plan is a welcomed relief for these struggling businesses who were already in an industry facing economic problems before the pandemic.

We’ll provide an overview of what the stimulus plan includes for the childcare industry and how it might impact you as a business owner.

Emergency Provider Stabilization Fund

The economic crisis that the pandemic brought with it led to many parents pulling their children out of childcare. This might be due to job losses or concerns about catching the virus with the added exposure of a child attending a childcare program.

This reduction in enrollment hurt childcare centers financially. But so did increasing requirements for social distancing and cleaning protocols that increased expenses. So there’s less money coming in and more going out than normal. 

The situation has left two out of five centers saying they would have to close their doors permanently without some sort of financial assistance.

The emergency provider stabilization fund helps providers pay necessary expenses, including rent, payroll and utilities. The fund also covers pandemic-associated costs, like personal protective equipment and improved ventilation. With this relief, fewer childcare businesses should have to close.

In total, the American Rescue Plan provides $25 billion to help childcare centers. More details are still yet to come about how childcare centers can apply for this aid.

$15 Billion for the Child Care and Development Block Grant Program

Keeping childcare centers afloat financially is only one part of the equation in solving the challenges the pandemic has presented. The other part is helping parents afford the service so that enrollment increases to sustain centers long-term.

The Child Care and Development Block Grant provides money to each state to provide subsidies to families who cannot afford childcare. Many parents in essential jobs still don’t make enough to cover childcare expenses. Subsidies help these families afford care for their children so they can continue working without serious financial strains.

Another way that each state can use these funds is to help increase wages and benefits for childcare workers. Many workers in the industry lack health insurance and work for an average of $11 an hour. High turnover rates further strain the childcare industry, so improved wages and benefits help immensely.

Expanded Child Tax Credit

For the 2021 tax year, the bill increases the normal $2,000 per dependent aged 17 and younger child tax credit. This year, parents will get $3,600 per child under age 6 and $3,000 for children ages 6 through 17. 

And instead of waiting for this money as a tax refund, the government will send a prorated amount to parents monthly starting as early as July. Parents could start getting checks for $300 a month per child ages 5 and under and $250 a month per child ages 6-17. 

While the payments from the increased child tax credit only last through Dec. 31, 2021, the administration is discussing extending the credit permanently.

For parents who are stretched financially, this is great news. But it’s also great news for child care centers that have suffered from low enrollment as unemployment has increased due to the pandemic.

How Childcare Centers Can Prepare for These Changes

One proactive step that childcare centers can take is to educate parents on the subsidies in their state. But you can also inform parents about the expanded child tax credit and how it can make childcare more affordable.

To ensure you get full subsidy payments, work with your state to make sure you’re documenting the right things in your childcare software. Many states have stringent rules about validating attendance and tracking developmental milestones. If you have questions about how iCare Software can accommodate such documentation, please contact us.

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