STATE OF PLAY: Federal Shutdown and Child Care/Early Learning Programs

The federal government shut down last night, with Congress unable to come to agreement over either the FY26 appropriations funding bill or a Continuing Resolution. While there are many unknowns and impacts across multiple federal agencies, here’s what we know about the impact this could have specifically on funding for child care and early learning programs:

STATUS OF THE DAY

Child care and early learning programs: In the immediate future, there is cause for watchful concern but not for panic. 

See BELOW for more detail, but in a nutshell: 

Child Care and Development Block Grants: States have multiple streams of funding and flexibility in timing for spending funds. In a short shutdown, services are unlikely to be disrupted on a wide scale. 

Head Start: Having learned from years past, very few Head Start grantees receive funding on October 1st. As a result, most services are unlikely to be affected immediately. That said, the longer a shutdown continues, the more likely it is that Head Start programs could see a disruption.

KNOW THE CONTEXT

The Constitution grants Congress the “power of the purse,” meaning it has the exclusive authority to set and spend funding for the U.S. Government. 

There are two types of funding at the federal level: Mandatory and Discretionary. 

• Mandatory spending – which accounts for roughly two-thirds of government spending – is set by law and operates on “autopilot,” meaning it does not need to be re-approved each year. It includes Social Security, Medicare, Medicaid, and various other programs. 
• Discretionary spending, on the other hand, must be set each year through the Appropriations process. It includes most other spending, covering defense, transportation, infrastructure, salaries for federal employees, education, health, and funding for child care and early learning programs. 

Each year, Congress sets the funding levels for all federal defense and non-defense discretionary programs for the following federal Fiscal Year (FY), which runs from October 1 through September 30 of the following calendar year. When it does not, one of two things will happen. 

• First, it can pass a Continuing Resolution (CR), a temporary spending bill that continues appropriations at the same level as the prior FY for a set number of days, allowing more time to pass an appropriations spending bill. 
• Or, second, the government “shuts down”, halting payments for federal defense and non-defense discretionary programs, delaying services, and furloughing hundreds of thousands of “non essential” federal employees until a CR or appropriations bill is passed. 

IMPACT ON CHILD CARE/EARLY LEARNING PROGRAMS

A shutdown always has an impact on many government agencies and programs; it also causes additional chaos and uncertainty, both for the national mood and for the economy. Here is what it means specifically for the two largest child care and early learning programs: 

Child Care and Development Block Grant (CCDBG) 

CCDBG is the largest source of funding for child care, providing states with flexible funding used to help low income families with the cost of child care. 

State funding for child care is received through the Child Care and Development Fund (CCDF), which combines two streams of funding: discretionary CCDBG funds – awarded annually – and mandatory funds under the Social Security Act.  States have 2 years to “obligate” CCDBG funds (or show how they plan to spend it) and an additional 1 year to “liquidate” the funding (or spend it down). This gives states flexibility and, in a short shutdown, services are unlikely to be disrupted on a wide scale  (assuming payment systems continue to work as they should). 

Head Start 

Head Start provides early learning and care, nutrition, health screenings,  and other support services to young children from the lowest income families. 

Head Start funds are provided to grantees annually, with grants awarded throughout the year on the 1st of each month. (With the government currently operating on a Continuing Resolution, however, Head Start programs are being awarded funds quarterly.) Very few Head Start programs are October 1st grantees; as a result, most services are unlikely to be affected immediately (assuming payment systems continue to work as they should). That said, the longer a shutdown continues, the more likely it is that Head Start programs could see a disruption.

As A Reminder

Before the shutdown, both the House and Senate passed Appropriations bills with funding proposals for child care and early learning programs, with level funding in the House and a slight funding bump in the Senate.

WHAT WE’RE WATCHING

Hill watchers are keeping an eye on three things in the coming days.

1. How long the shutdown lasts. The longer a shutdown lasts, the bigger the disruption on programs and agencies. Programs with unspent funds may not see an initial impact but could begin to see one if a shutdown stretches out. For context, the longest shutdown in U.S. history was a 34-day partial shutdown from December 2018 to January 2019.
2. How agencies respond. The Administration has a fair amount of discretion in determining how broadly a shutdown affects employees and services. Each agency determines which employees are furloughed (or put on leave) as well as which services are essential (and must continue), and which are not (and must be halted). This varies from agency to agency and from shutdown to shutdown. (Note: Members of Congress also make that determination for their own office staff.)
3. Managing the unknown. There’s no shortage of theories on what happens next, but the simple truth is that no one really knows how this will all play out. With child care specifically, Hill watchers are keeping an eye on whether payments systems continue to operate as they should, the impact furloughed workers will have on services, and the impact other facets of the shutdown could have on families also served by CCDBG and Head Start.  

LEARN MORE

• Brookings: What is discretionary spending in the federal budget?
• PBS News – “What closes during a government shutdown? What we know about how it would unfold” 
• CBS News – The federal government is heading toward a shutdown. Here’s what economists say would be the impact.
• New York Times – Which Federal Benefits and Services Continue During a Government Shutdown?