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Congress is considering legislation built around President Biden’s Build Back Better (BBB) proposal  – now known as the Build Back Better Act – which Democrats are working to pass through the budget reconciliation process. BBB includes policies and investments that, if enacted, would save families thousands of dollars in child care and preschool costs and build a strong, stable early learning system that meets the needs of families, providers, and the economy. 

The proposed federal investments in child care and pre-K, along with crucial enhancements to existing tax benefits, underscore the Biden administration’s commitment to finding solutions to America’s longstanding child care crisis by addressing widespread challenges with access, affordability, and quality in early learning, while reinforcing the benefits of a strong mixed-delivery system that prioritizes parent choice in determining the type and setting of care that best meets a family’s needs. The proposal would build on existing state and federal preschool programs by providing funding to cover the federal share of the cost of a voluntary universal pre-k (UPK) program for all children, regardless of income or other eligibility requirements, in a variety of settings. Additionally, the proposal seeks to resolve existential flaws in America’s child care market caused by decades of underinvestment, which create an entirely untenable business model for providers that often translates into near-poverty wages for early educators.

What does the Build Back Better Act proposal mean for child care?

The legislation creates a child care and early learning entitlement program for children under six who have not yet started kindergarten. 

  • For eligible families who want to participate this means access to affordable, high quality child care in the setting that best meets their needs.
  • For states this means federal funding will be provided from FY2022-FY2024 to support supply building and a phased-in expansion of income eligibility. States who take up this funding will be required to provide child care assistance to all eligible families by October 1, 2024. In FY2025 and beyond, child care assistance expenses will be shared between the state (10%) and federal government (90%).
  • In order to raise wages and sufficiently compensate the workforce, participating child care providers would be paid based on a structure that uses a valid and reliable cost estimation model or cost study for the payment rates of child care services in the state. Payment rates would depend on where a provider falls on the state’s tiered system for measuring quality.

Which children and families will be eligible for child care?

  • During the 3-year phase in, eligibility would be limited to children in families with incomes at or below a specified level: 100% of state median income (SMI) in FY2022, 115% of SMI in FY2023, and 130% of SMI in FY2024. Family copayments would vary by income.
    • SMI is the income amount that divides a population into two equal groups: half having an income above that amount and half having an income below that amount.
    • Using SMI to calculate income eligibility and copayments, rather than the federal poverty line, helps to take into account the differences in cost of living from state to state.
      • For example, in the first year, a family of 4 in Arizona making $72,551 a year (100% SMI) would pay no more than $1,451 a year for child care, while a family of 4 in New Mexico making $60,673 a year (100% SMI) would pay no more than $1,213 a year.
  • After the 3-year phase in, eligibility would be expanded to include families above 130% SMI.
    • An amendment adopted by the House Education and Labor Committee, established no income limit starting in FY2025. However, families in all years would be subject to an asset test of $1 million.
  • In general, a child must have one parent or legal caregiver who is working or participating in another eligible activity (e.g., job search, job training, educational program, health treatment for a work-limiting condition, or family leave). 
  • Exceptions to the parental activity requirement would be made for certain vulnerable children (including foster children and children experiencing homelessness) and for children with a parent over age 65. Once deemed eligible, a child would be considered eligible for two years.

How will the federal funds be distributed? Is there a state match?

In FY2022-2024, participating states would receive an allotment based on the Child Care and Development Block Grant (CCDBG) Act. This allotment is intended to cover the costs of building supply and expanding access to quality child care for three years and does not require a state match. The state is required to use:

  • 50% of funds on expanding access to child care subsidies for children in families with incomes less than 85% SMI and increasing payment rates to support the cost of providing high-quality child care services; 
  • 25% of the funds on child care supply and quality building activities; and 
  • 25% of the funds on either subsidy and grant expansion or supply and quality building.

After the initial 3 years, in FY2025-2027, states receive reimbursement from the federal government for:

  • Child care assistance. Child care assistance covers the grants, contracts, and certificates needed to cover the full cost of providing high-quality child care, reflecting a capped family contribution. States cover 10% of these costs, and the federal government covers 90% of these costs. 
  • Quality and supply activities. While some costs of high-quality child care will now be covered under direct assistance, states must spend between 5-10% of their total program expenses on quality and supply activities. The federal government will cover these costs using the federal medical assistance percentage (FMAP) rate, which leaves a 20-50% share for states, depending on the state. 
  • Administration expenses. States and the federal government will split these costs. 

Separate from match requirements, states would have to meet a maintenance-of-effort requirement in all years based on state spending on child care in FY2021.

What must states do to implement the new child care program if they opt in?

Within three years of receiving funds, states must:

  • Raise payment rates to meet the cost of care, including, at a minimum, providing a living wage and establishing wages equivalent to elementary educators with equivalent credentials;
  • Create a tiered system to measure the quality of child care providers and help providers to reach higher quality standards (highest tier standards would be at least equivalent to Head Start Program Performance Standards (HSPPS)); and
  • Implement licensing standards and a pathway to licensure available to and appropriate for providers in a variety of settings.

States’ plans must include assurances they will:

  • Prioritize increasing access to and the quality and supply of child care for underserved populations, including, at a minimum, low-income children; children in underserved areas; infants, toddlers, and children with disabilities; children who are dual language learners; and children who receive care during nontraditional hours.
  • Provide assistance to children for not less than 24 months.
  • Prohibit child care providers from charging families more than the required copay.

What are the Head Start Program Performance Standards (HSPPS)? 

HSPPS define standards and minimum requirements for all Head Start services. These standards:

  • Apply to both Head Start and Early Head Start programs; 
  • Serve as the foundation for Head Start’s mission to deliver comprehensive, high-quality individualized services supporting the school readiness of children from low-income families;
  • Reflect best practices and the latest research on early childhood development and brain science; and 
  • Give grantees flexibility in achieving positive child and family outcomes and encourage the use of data to track progress and reach goals in all program areas.

Is child care for school-aged children included in this proposal? 

No. The program is intended for children from birth through age five who are not yet in kindergarten. Families with school-aged children may see expanded options available through CCDBG, as that program will shift focus from early learning once the new entitlement is in place.

What happens to the current CCDBG funding? 

  • States will continue receiving CCDBG funding. 
    • For states who opt in to the child care proposal, spending on care for children under 6 would be limited to 10% of CCDBG, including, for example, relative and family, friend, and neighbor providers who are not part of the licensed system, thus increasing to 90% the amount being used to assist with out-of-school time care for children ages 6-13. (Currently, 34% of CCDBG subsidies help pay for school-aged care.)
    • For states that choose not to opt in to the child care proposal, they will continue to receive CCDBG funding as they do today with no changes. 
  • CCDBG remains otherwise unchanged and available for those system-supporting purposes in current law.

How will the BBB expand access to Pre-K in states that opt in?

The Build Back Better Act would create a high-quality, free, inclusive, and mixed-delivery preschool program available to all three- and four-year-old children on a voluntary basis. 

  • 44 states and the District of Columbia fund pre-k programs, however, in the 2019-20 school year, these programs enrolled just 34% of 4-year-olds and 6% of 3-year-olds.
  • 35 states have an income requirement, making many children and families ineligible. 
  • States have struggled to fund pre-k programs, particularly when faced with declining state revenue, and already rely on federal funding to serve preschool-aged children, particularly children from low-income families and children with disabilities or developmental delays.
  • The proposal would build on existing state and federal preschool programs by providing funding to cover the federal share of the cost of a universal pre-k (UPK) program for all children, regardless of income or other eligibility requirements. 

How would UPK be funded?

  • To increase the quality and supply of child care services, in FY2022-FY2024, there would be no state match required for spending on the costs of preschool services. 
  • Starting in FY2025, states (including the District of Columbia) must contribute a 10% match, in cash or in kind. The required state match would increase incrementally, stopping at 40% in FY2028. 
  • Spending on state-level activities must be matched at 50% in each year (FY2022-FY2028). Total spending on state-level activities would be capped.
  • Federal funds must supplement, not supplant, other federal, state, and local funds for early childhood care and education programs. Thus a state must maintain its investment in any existing publicly-funded preschool programs or state-funded Head Start programs. If a state reduces per child spending, the Department of Health and Human Services (HHS) (in collaboration with the Department of Education (ED)) may correspondingly reduce federal funds. 

Is the UPK proposal a school-based system? 

  • No. The legislation requires states to support a mixed-delivery system. This includes equitable distribution of preschool seats among settings including Head Start, schools, and child care (including family child care).   
  • Eligible preschool providers include Head Start agencies; local educational agencies (acting alone or with an educational service agency) that are licensed by the state or meet comparable health and safety standards; licensed child care providers (including center-based providers, family child care providers, and community- or neighborhood-networks of family child care providers); or a consortium of such entities.

What are other requirements of the UPK program?

  • Requires programs to be universally available, high-quality, free, and inclusive. States must have in place and programs must meet state preschool education standards, which must, at a minimum, be as rigorous as the school readiness section of HSPPS, include standards for class sizes and ratios, and use Head Start duration standards (at least 1,020 annual hours). States must also have policies for expedited enrollment for certain populations, and prioritize localities serving high-need communities.
  • Specifies subgrants or contracts with preschool providers will be for at least three years.
  • Requires state plans to provide assurances that it will provide salaries and set salary schedules for preschool staff that are equivalent to salaries of elementary school staff with similar credentials and experience and, at a minimum, provide a living wage for all staff of such providers.

Who would administer the new Child Care and UPK Programs?

  • Funds for both programs would be appropriated to the U.S. Department of Health and Human Services (HHS). 
  • The UPK program would be administered by HHS in collaboration with the U.S. Department of Education (ED).
  • At the state level, the child care program would be administered by a lead agency (an appropriate collaborative agency or a newly-established joint interagency office), designated by the governor, pursuant to a plan approved by the Secretary of HHS.
  • Similarly, the UPK program would be administered by a state lead agency (a state agency or joint interagency office), designated by the governor, pursuant to a plan approved by the Secretary of HHS.

Is Head Start included in the UPK proposal? 

Yes. The UPK proposal specifies Head Start agencies are eligible providers, and states must describe how they will partner with Head Start agencies to ensure the full utilization of Head Start programs. Additionally, from amounts appropriated for UPK, the proposal designates $2.5 billion annually for FY2022-2027 to improve compensation for Head Start staff, and Head Start agencies may apply for both the child care and UPK grants to localities in states that opt out of funding (explained further below).

What will happen if a state “opts out” of either the child care or UPK program? 

  • Generally, things will remain unchanged as it pertains to child care subsidies and preschool at the state level. States would continue to receive mandatory and discretionary CCDBG funds.  
  • The proposal includes optional grants to localities in these states, including cities, counties, and Head Start grantees, with priority given to localities seeking to serve underserved populations. Total funding for these grants is as follows:
    • For FY 2022-2027, $9.6 billion annually for Local Birth to Five Early Learning Grants.
    • For FY 2023-2028, $1.25 billion annually for UPK grants.

Are current providers included in the proposals for child care and UPK? What if they are not currently licensed?

Yes, current providers are included. Under the child care proposal:

  • Providers who have been eligible under CCDBG will be deemed “eligible providers” for three years after their home state receives funding. 
  • Current providers who have not been participating in CCDBG but who are licensed, participate in the state’s tiered system for measuring quality within three years of their state receiving funding, and meet a state’s CCDBG provider requirements would also be eligible. 
  • Within three years of receiving funds, states must create a pathway to appropriate licensure for providers who are not currently licenced. 

Under the UPK proposal:

  • States must provide assurances they will require educational qualifications for teachers including, at a minimum, requiring lead teachers to have a baccalaureate degree in early childhood education or a related field within seven years of enactment. 
  • The degree requirement would not apply to individuals employed by an eligible child care provider or early education program for three of the last five years with necessary content knowledge and teaching skills as determined by the state. 
  • States must also partner with at least one institution of higher education to facilitate degree attainment for staff of preschool programs.

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