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Focus on Facilities: LIIF Endorses Federal Investment in High-Quality Early Care and Education Facilities

Written by Low Income Investment Fund

This is the second article in the series, Where Children Learn, Grow & Play which examines the “triple halo” effect of investing in the early care and education (ECE) sector.

Bipartisan support for increased federal investments in improving early care and education (ECE) has grown in recent years as the long-term impacts of high quality ECE on children’s life trajectories has become more widely known. Research by Nobel Laureate James Heckman and others has consistently shown that children who attend well-run programs from 0-5 years old grow up to do better in school and have lower rates of crime, delinquency and welfare dependence. And the Organization of Economic Cooperation and Development (OECD) notes that, while quality ECE benefits all children, disadvantaged children benefit disproportionately, developing lifelong learning and socioemotional skills.

Federal Funding for ECE

The Child Care and Development Block Grant (CCDBG) – the largest source of federal funds to improve the quality of child care for low-income families – has seen a remarkable increase in funding in the past two fiscal years. In fiscal year (FY) 2018, Congress effectively doubled discretionary funding for CCDBG by adding $2.37 billion, bringing total discretionary funding for the program to $5.226 billion. In FY 2019, Congress increased this funding by another $50 million, bringing total discretionary funding to $5.276 billion. And in the current budget year, FY 2020, the House of Representatives included a stunning $7.67 billion for CCDBG in its appropriation for the Department of Health and Human Services. While this funding level is unlikely to survive negotiations with the Senate in the wake of an agreement setting budget caps for FY 2020 that are substantially lower than the House’s assumed caps, some further increase in CCDBG is quite possible given its strong bipartisan support.

CCDBG’s rapid growth after years of stagnant funding is a major victory for the ECE sector. Unfortunately, to date, one critical element of successful early childhood education has been left out of the mix: access to high quality facilities. Families will continue to face difficulty locating or accessing early care and education services without concerted resources to create the physical spaces required to provide high-quality care and education.

Importance of Facilities

The physical quality of existing child care facilities is also of serious concern. There has not yet been a national needs assessment completed on the safety and quality of early learning facilities, although available analysis does suggest that there are serious issues. The Environmental Protection Agency (EPA) estimates that there are 500,000 ECE facilities with unregulated drinking water, potentially exposing children to lead, and an investigation of 10 states by the U.S. Health and Human Services Office of the Inspector General found that 96 percent of ECE centers had at least one instance of potentially hazardous health and safety violations.

Barriers to Financing High-Quality Child Care Facilities

The primary obstacle to accessing high quality facilities is a lack of dedicated federal funding. The use of CCDBG and other federal early childhood funding streams (e.g., Head Start) is both highly restricted programmatically and administratively complex to execute.

This is especially problematic given the capacity challenges faced by ECE providers when it comes to addressing their facilities needs. Child care providers are focused on the children and often need support to manage the real estate finance, architectural design and other technical aspects high-quality facilities.

The community development financial institution (CDFI) sector has an important role to play in providing capacity building and technical assistance to assist providers in navigating the facilities financing process. CDFIs offer the patient, flexible capital that non-profits and small entrepreneurs need to run their businesses. CDFIs have experience administering capital dollars efficiently and effectively and can leverage additional funding to amplify the impact of any federal dollars invested in child care facilities.

LIIF has been investing in high quality early care and education facilities for more than 25 years, creating 271,000 slots for children. Using capital, capacity building and public advocacy together, LIIF builds sustainable community-based systems to support ECE facility financing and development. LIIF also recently partnered with the San Francisco Office of Early Care and Education (OECE) to launch the Fund for San Francisco Early Care & Education. By leveraging OECE grants within the New Markets Tax Credit (NMTC) program, the Fund will provide flexible, low-cost financing for the development or preservation of ECE center facilities in San Francisco.

Despite innovative efforts to finance child care facilities, demand far exceeds supply for high-quality ECE slots, particularly for low income families. A dedicated funding mechanism for these facilities is needed to take LIIF and others’ work to scale.

Emerging Federal Opportunities

Recognizing the importance of federal investment in early child care facilities, the Bipartisan Policy Center (BPC) convened a group of ECE stakeholders – including early childhood advocates, practitioners, philanthropy and others – to explore federal opportunities for improving child care and early learning facilities. The result was a public event, From the Ground Up: Improving Child Care and Early Learning Facilities, where Jonathan Harwitz, LIIF’s Managing Director for Federal Policy & Government Affairs, participated in a panel discussion on federal opportunities for investing in ECE facilities. That afternoon, Jonathan joined others in briefing Congressional staff.

Building on the need for data about the current state of these facilities, as well as best practices from intermediaries in delivering facilities financing, the event and Congressional briefing unveiled a comprehensive set of federal policy recommendations. In short:

1. Congress should direct the Department of Health and Human Services (HHS) to conduct a national needs assessment of quality early care and education facilities to help define the need for facilities with better data.

2. Congress should establish a $250 million federal competitive grant program through HHS that supports center-based and family child care construction and rehabilitation. States would be required to partner with CDFIs or other mission-driven intermediaries in the distribution of the grants. Additionally, up to 15 percent would be provided via a national competition to CDFIs and other intermediaries to support capacity-building, technical assistance and innovative financial products such as credit enhancement and revolving loan funds.

LIIF strongly endorses these congressional recommendations along with 17 other CDFIs and ECE advocacy groups. Federal investment in child care facilities is a critical and immediate need. Without high-quality child care facilities, parallel federal, state and local efforts to improve child care are at risk of falling flat.