{"id":13021,"date":"2025-07-15T16:46:13","date_gmt":"2025-07-15T16:46:13","guid":{"rendered":"https:\/\/www.liifund.org\/?post_type=perspective&p=13021"},"modified":"2025-07-15T17:37:32","modified_gmt":"2025-07-15T17:37:32","slug":"harnessing-innovative-state-strategies-for-child-care-investments-a-roadmap-to-national-solutions-meet-community-needs-part-3-federal-policy-applications","status":"publish","type":"perspective","link":"https:\/\/www.liifund.org\/perspective\/harnessing-innovative-state-strategies-for-child-care-investments-a-roadmap-to-national-solutions-meet-community-needs-part-3-federal-policy-applications\/","title":{"rendered":"Harnessing Innovative State Strategies for Child Care Investments: A Roadmap to National Solutions to Meet Community Needs, Part 3 (Federal Policy Applications)"},"content":{"rendered":"
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Throughout our blog series (Part 1<\/a> and Part 2<\/a>) we showcased innovative state strategies to fund early care and education (ECE) infrastructure through creative financing solutions to meet families\u2019 child care needs. For our final installment, we will explore how lessons from these public-private capital models can inform federal policy and program design. By partnering across local, state and federal levels, governments can unlock effective financing strategies that strengthen the ECE ecosystem \u2014 supporting thriving small businesses, comprehensive community development and a resilient workforce. Key actions include establishing dedicated funding streams for child care facilities, incentivizing co-location strategies, and promoting public, private and philanthropic pilot initiatives supported by technical assistance. <\/p>\n<\/div><\/section>

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Establishing Dedicated Child Care Supply Funding<\/h2>\n<\/div><\/section>
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Currently, there is no permanent, dedicated federal funding mechanism for the acquisition, construction or renovation of ECE facilities; however, states such as New Mexico, California, Georgia and Iowa, as well as Washington, D.C., demonstrate the opportunity and need to allocate stable yet flexible capital that can be leveraged for physical infrastructure to expand child care supply. Federal policymakers must work in tandem with state-level policymakers to address child care funding gaps that contribute to child care deserts.  <\/p>\n<\/div><\/section>

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One possible policy solution is strengthening the Child Care and Development Block Grant<\/a> (CCDBG). While\u202f CCDBG is the largest source of federal funds to improve the quality of child care for low-income families, administrative complexities make it difficult for states to utilize it for facilities \u2014 specifically, for major construction or land purchase.  As the leading national community development financial institution (CDFI) in the ECE space, LIIF champions bipartisan efforts to both increase CCDBG funding levels and strengthen CCDBG and policies that build sustainable community-based systems to support ECE facility financing and development.  <\/p>\n<\/div><\/section>

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In addition to CCDBG, Congress should establish a\u202ffederal competitive grant program\u202fthrough Health and Human Services (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% 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. <\/p>\n<\/div><\/section>

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Incentivizing Co-Location Strategies<\/h2>\n<\/div><\/section>
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Housing and child care are the biggest expenses<\/a> for families. Co-locating ECE facilities with affordable housing developments is a promising strategy<\/a> to support communities by improving family access to two vital sources of household stability and economic mobility; however, quite often, unless significantly adapted, existing community development tools by themselves do not adequately address the investment needs of child care facilities. States such as New York have shown how integrating incentives for co-location in programs (e.g., the Low-Income Housing Tax Credit, or LIHTC) can drive comprehensive community development efforts that expand access to child care and better meet the needs of families.  <\/p>\n<\/div><\/section>

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Similar to LIHTC co-location incentives, the federal government should encourage ECE incentives through other programs such as the Emergency Capital Investment Program<\/a> (ECIP). ECIP is a program operated by the Department of Treasury, which has the authority to reallocate repayment funds (totaling $100 million) to CDFIs for community development purposes and incentivize the expansion of innovative co-location projects. Reallocating these funds in support of two pressing national challenges \u2014 shortage of homes that are affordable and access to child care and early learning programs \u2014 is consistent with those purposes and would help to simultaneously address both crises. Additionally, Treasury should make technical assistance (TA) awards with these funds to help build the capacity of CDFIs to provide affordable financial products and services to child care and early learning businesses and programs.  Directing these funds to CDFIs will bolster impact given CDFI\u2019s multiplier effect and expertise with financing co-location models in undercapitalized communities.  <\/p>\n<\/div><\/section>

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Encourage Innovative Public-Private Partnerships and Pilots, with Technical Assistance Supports<\/h2>\n<\/div><\/section>
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Despite their value, many child care providers are unable to access business and infrastructure supports from traditional financial institutions. Effectively combining public-private partnerships and philanthropic capital is crucial to overcome financial barriers and address funding gaps in the sector. As featured across the first two installments of this blog series, states such as North Carolina and Iowa have demonstrated the power of designing innovative pilots that leverage a combination of public, private and philanthropic resources, plus utilize technical assistance to maximize impact. Federal policymakers should promote opportunities for businesses, local governments and nonprofit organizations to jointly invest in child care, supported by tailored TA.\u00a0This could utilize the expertise and capital of CDFIs to finance, administer and support child care solutions\u00a0such as flexible capacity-building grants for ECE small business owners. Specifically, CDFIs offer experience efficiently and effectively administering capital and can leverage additional funding to amplify the impact of any public dollars invested in child care facilities. Any partnerships or pilots can be bolstered through targeted TA supports that help small businesses and local governments navigate financing tools, facility development and regulatory compliance. \u00a0<\/p>\n<\/div><\/section>

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As a CDFI, LIIF mobilizes financial and technical resources essential to thriving ECE ecosystems. For example, LIIF recently announced its new Family Child Care (FCC) Capital Access initiative<\/a>, which provides loans and technical assistance to licensed in-home providers. The initiative is a partnership between LIIF, two other CDFIs (Ascendus and Working Solutions CDFI) and the Mastercard Center for Inclusive Growth, which provides philanthropic support through the Mastercard Strive business program. A coordinated federal approach to partnerships and pilots that combines funding sources and build capacity among ECE stakeholders can unlock scalable, sustainable solutions to the nation\u2019s child care crisis.   <\/p>\n<\/div><\/section>

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Conclusion<\/h2>\n<\/div><\/section>
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Quality child care and early learning programs create immediate and long-lasting benefits for individuals and society because they facilitate children\u2019s social and intellectual development, parental participation in the workforce and ECE providers\u2019 ability to operate successful businesses. Yet far too often child care providers and the ECE ecosystem lack the adequate investments for families to access affordable child care. States across the country have developed successful models that drive investments into a chronically underinvested sector. While states play a critical role in addressing these gaps, solving the child care crisis demands coordinated support across all levels of government. Federal policymakers should apply lessons from these proven state models to work in partnership across sectors and all levels of government to build a sustainable, high-quality child care system.  <\/p>\n<\/div><\/section>","protected":false},"excerpt":{"rendered":"

Throughout our blog series (Part 1 and Part 2) we showcased innovative state strategies to fund early care and education (ECE) infrastructure through creative financing solutions to meet families\u2019 child care needs. For our final installment, we will explore how lessons from these public-private capital models can inform federal policy and program design. By partnering…<\/p>\n","protected":false},"featured_media":13022,"template":"","categories":[14],"custom_author":[359],"class_list":["post-13021","perspective","type-perspective","status-publish","has-post-thumbnail","hentry","category-early-care-and-education","custom_author-makenzi-sumners"],"acf":[],"yoast_head":"\nHarnessing Innovative State Strategies for Child Care Investments: A Roadmap to National Solutions to Meet Community Needs, Part 3 (Federal Policy Applications) - Low Income Investment Fund<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.liifund.org\/perspective\/harnessing-innovative-state-strategies-for-child-care-investments-a-roadmap-to-national-solutions-meet-community-needs-part-3-federal-policy-applications\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Harnessing Innovative State Strategies for Child Care Investments: A Roadmap to National Solutions to Meet Community Needs, Part 3 (Federal Policy Applications) - Low Income Investment Fund\" \/>\n<meta property=\"og:description\" content=\"Throughout our blog series (Part 1 and Part 2) we showcased innovative state strategies to fund early care and education (ECE) infrastructure through creative financing solutions to meet families\u2019 child care needs. 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