Cooperation paves the way for important investments in affordable child care

Jessie Luévano
May 11, 2023
With a historic surplus of $17.5 billion for FY 2024-25 and $5.4 billion structural balance for FY 2026-27, Minnesota policymakers have an opportunity as they make state budget decisions to make transformational, targeted investments so that every Minnesotan has the resources needed to thrive. 

To ensure the best future for children and families, we support policy changes so that all Minnesotans have affordable child care so parents can work or go to school, children get off to a strong start, and employers can attract and retain the workers they need. Governor Tim Walz, the Senate, and House all have budget plans that invest in that future, and share many similarities.

The budget target agreed upon by Walz and the Legislature for children and families is $1.2 billion in additional funding for FY 2024-25. This is the portion of the state budget that funds various early education programs such as Pre-K and developmental screenings, as well as child care assistance.  

The governor, House, and Senate all agree there should be more investments so families across the state can better obtain affordable child care to meet their needs. Their child care proposals include provisions to serve more families, support the child care workforce, and increase reimbursement rates paid to providers to better match the cost of caring for children.

Increasing access to affordable child care

One critical avenue for affordable child care is through the Child Care Assistance program, which helps bring down the cost of child care for lower-income families. In FY 2024-25 and FY 2026-27, Walz and the House allocate additional funding for Child Care Assistance, an additional $30 million per biennium, and the Senate allocates $20 million. These funds will increase the number of families served.  

One way these proposals will reach more families is reprioritizing the child care assistance waiting list. In 2021, the Legislature temporarily reprioritized the waitlist, making technical changes to which families qualify in what order, which allowed families to be served faster and more families to be reached overall. The governor, House, and Senate’s budget plans all include provisions to make the reprioritization of the waitlist permanent.
All three plans also would expand the kinds of families that can qualify for child care assistance to include foster families and custodians, recognizing the value of the care that they provide. 

Early learning scholarships are another way that families get assistance to afford the child care they need. The governor, House, and Senate all propose expanding eligibility for early learning scholarships. Current eligibility prioritizes children aged 3-4 and only includes younger children under certain limited conditions. The proposals would expand eligibility to include all children aged 0-4 who otherwise qualify. 

The governor, House, and Senate all propose increased funding for early learning scholarships to serve these additional families. The plans all recommend slightly different numbers, with the governor proposing more additional funding overall. The governor recommends $180 million per biennium; the House recommends $266 million for FY 2024-25 and $81 million for FY 2026-27; and the Senate recommends $271 million for FY 2024-25 and $71 million for FY 2026-27.

Strengthening the child care workforce

All three budget plans include proposals for Child Care Provider Retention payments. These proposals build off of investments into the child care ecosystem made to provide stability during the disruptions during the public health emergency resulting from responses taken to keep Minnesotans safe. Child Care Stabilization grants were created using one-time federal American Rescue Plan dollars to support the child care sector by providing funds to support operational expenses, employee wages, business consultation, and facility revitalization. 

Child Care Stabilization grant funding is soon coming to an end. Policymakers are looking to provide a smooth transition, and propose to replace this funding with Child Care Provider Retention Payments. Provider retention payments specifically fund increases in compensation and benefits for child care providers working in eligible programs so they are able to make closer to a living wage. 

The governor, House, and Senate all propose funding in different ways. The governor and House propose $47 million in FY 2024-25 and the Senate $42 million to extend the existing Stabilization Grants program for three months to ensure continued financial support for the sector while the new child care retention program is being prepared to launch. Regarding Provider Retention Payments, Walz recommends the highest investment at $280 million for FY 2024-25 and $332 million for FY 2026-27; the Senate recommends $246 million for FY 2024-25 and $291 million for FY 2026-27; and the House recommends the lowest investment of $191 million in FY 2024-25 and $158 million for FY 2026-27.

Increasing child care provider reimbursement rates to the 75th percentile 

The House and Senate budget plans, as well as the governor’s budget recommendations, all would increase the reimbursement rates the state pays to child care providers through child care assistance to the 75th percentile of the most recent market survey. This would finally get these rates up to the level of federal recommendations to ensure families have greater access to child care, more choice in providers, and less financial hardship. Minnesota currently falls well short, with rates set at the 40th percentile for infants and toddlers, and the 30th percentile for preschool and school-aged children. With families from across the state continuing to struggle to find affordable child care that meets their needs, it is vital that this investment makes it across the finish line this legislative session. 

The Health and Human Services and Children and Families conference committees have been tasked with making the budget decisions impacting Minnesota’s children and families, and are expected to finalize those decisions this week. While there are important decisions about the specifics at stake, it seems clear that the final budget will help more Minnesota families afford the child care that their families need.