Optimizing Federal COVID Relief Funds: State Perspectives on Bolstering Child

States have proven they can build the necessary infrastructure and operations that fully appreciate the business model of the early childhood sector with consistent investments in resources, necessary flexibilities, and integrated systems.

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The COVID-19 pandemic placed an unprecedented strain on the early childhood sector, compounding serious pre-pandemic problems that threatened to wreak havoc on what is arguably the backbone of the U.S. economy, working parents. Multiple studies showed that many providers shuttered at the pandemic’s start. One report found that close to 16,000 licensed providers nationwide permanently closed between December 2019 and March 2021. Further, employment in the sector dropped 35% in April 2020, worsening the early care and education (ECE) workforce shortage that existed before the pandemic.

In response, Congress passed a series of COVID-19 pandemic relief packages: the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020; the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act in December 2020; and the American Rescue Plan (ARP) Act in March 2021. The three relief packages contained $52.5 billion in emergency supplemental Child Care and Development Fund (CCDF) funds and provided states with historic funding levels to address the challenges facing the early childhood sector. For context, in fiscal year 2019, Congress appropriated $8.1 billion for the CCDF, the largest federal early childhood program. Each new COVID-19 relief funding source included temporary, programmatic flexibilities to help states meet the needs of early childhood providers and families.

About the Report

This report examines how states strategically approached managing and administering the historic influx of COVID-19 relief funds, focusing on governance structures, funding management systems, and data systems. The report explores the rationale and influencing factors that informed decision-making for state executives and policymakers on disbursing funds, rather than compiling examples of state early childhood initiatives during the pandemic.

To decipher states’ strategic approaches, the National Governors Association conducted a series of learning calls with 14 states and hosted an in-person roundtable during the spring of 2023 to ascertain Governors’ offices and state administrators’ perspectives on the topic.

This report is organized into five sections:

1. Aligning on priorities;
2. Relying on state governance structures and coordination;
3. Authorizing the disbursement of federal funds;
4. Disbursing funds, including the application process; and
5. Modernizing data systems and strengthening data collection.

Each section captures key discussion points and highlights strategies employed by Alabama, Colorado, Connecticut, Iowa, Kentucky, Maine, Massachusetts, New Jersey, New Mexico, North Carolina, Ohio, Rhode Island, South Carolina, and Utah.

Key Takeaways

States were pressure-tested, especially when it came to the ECE workforce, which was already at a crisis point prior to the pandemic. The COVID-19 pandemic’s impact on the sector and the historic levels of federal funds states received marked an inflection point. Most states acknowledged that with sufficient and consistent investments in resources, flexibility, and integrated systems and coordination, states can stand up and strengthen systems to stabilize the early childhood sector. While states achieved great successes during the pandemic, the sector’s instability and the effects it will have on the overall ECE workforce continue to reverberate.

At the beginning of the pandemic, states operated in a rapid response climate where the needs and problems of the early childhood sector constantly changed.

• Alignment of priorities and integrated governance systems were foundational to efficiently employing strategies, especially around access, while keeping quality of care in mind.
• The more decentralized the state’s system, the more states reported facing delays, challenges in investing resources most effectively, and difficulty in disbursing funds.

The expiration timeline for COVID-19 relief funds, with ARP funds expiring in September 2024, played a pivotal role in how states disbursed funds. States faced balancing how to meet the immediate needs of the sector with how to strengthen and sustain systems once the federal emergency funds ended. The anticipation of the fiscal cliff, the ending of the availability of these additional federal funds, contributed to state decisions on whether to invest in one-time, non-recurring efforts or longer-term efforts that would need greater investments either by the state or federal…