Families face uncertain day care outlook as state spends last of federal funds

The state will stop taking applications for a day care subsidy program in November and will start a waitlist that could last 18 months

By: - October 2, 2023 6:00 am
toddlers playing child care

Many people across Oregon are in child care deserts, with three or more children vying for each opening. (Getty Images)

Like thousands of other parents in Oregon, it was never easy for Luz Quevedo to find affordable day care for her son — even when she qualified for help from the state.

Quevedo, 48, owns an esthetics business and works part time as an organizer for the child care advocacy group Family Forward Oregon in Salem, where she is raising her 4-year-old son.  Like the vast majority of the state, there are so few options for child care in Quevedo’s community that it’s considered a child care desert, with three or more children for every opening. And even then, care is prohibitively expensive for most families. A March survey found that 60% of Oregonians pay at least one-fifth of their income on child care, which is more than three times what the federal government considers affordable.

At one point, Quevedo quit her job at a coffee shop to watch her child because she couldn’t afford care, she said. 

This spring, Quevedo began receiving a subsidy for child care through the state’s Employment Related Day Care program, which is open to low-income households. A family of two can earn a maximum of $3,287 gross a month and a family of five, $5,000. The program pays up to allowed limits, and the family has to pay the rest. In Quevedo’s case, the subsidy pays almost half the $1,300 monthly cost of her son’s care at a local center.

Like Quevedo, thousands of low-income families in Oregon began to receive a subsidy this year as state lawmakers expanded the program: Between January and August, more than 4,000 families enrolled in the program, a more than 50% increase in recipients. The program now serves about 23,000 kids, according to the Department of Early Learning and Care.

But thousands of eligible families won’t be able to sign up for the benefit that’s been fueled by federal money during the pandemic. 

In 2021, Oregon received about $400 million from the American Rescue Plan for child care. But that funding has ended. The early learning department will spend the last of it within the year, leaving a funding gap for the program and uncertainty about how it may be filled, agency director Alyssa Chatterjee said in an interview. Federal money pays for about a quarter of the program’s $353 million budget.

Chatterjee said the agency’s budget isn’t enough to cover the more than 14,000 families receiving the benefit, let alone hundreds or thousands more families that might be eligible to sign up this fall. The state’s early learning department has announced it will stop approving more families for Employment Related Day Care on Nov. 3 because of “limited funding.”  New applicants will be put on a waitlist, the department said in a news release. Some families will still be eligible to sign up. The waitlist will last for at least 18 months, depending on the rate at which families drop off of the program and how much funding the Legislature commits next year, the department said. 

State support for more funds

Advocacy groups including Family Forward are frustrated and calling for state lawmakers to dole out more money. So is Gov. Tina Kotek. In a statement, she said the program needs at least $50 million more in state funds to serve low-income families for the current budget cycle from 2023-25.

House Speaker Dan Rayfield, D-Corvallis, said in an interview that the subsidies are a “tremendous” help to families and kids. 

He said the funding gap was expected and pledged to allocate the funds the program needs, adding that the dollar amount would have to be fleshed out during the budget process in the 2024 session.

“This is one of these issues that we are absolutely going to have to fix in the short session,” Rayfield said. 

However, advocates say that lawmakers like Rayfield could have already fixed the problem by heeding their calls in June for more funding.  

The situation isn’t unique to Oregon. Child care systems in states across the country face similar challenges as pandemic-era funding runs out.

The basics

Employment Related Day Care serves families with income up to 200% of the federal poverty level, or $5,000 per month for a family of four.

Families who think they are eligible for the benefit can apply until Nov. 3 at 11:59 p.m. To apply, visit Benefits.Oregon.gov. You can also apply by calling 800-699-9075 or by going to a local office, which are listed here.

Some new families will be able to sign up through the waitlist, such as those receiving Temporary Assistance for Needy Families. For a full list of eligible families and other options for day care assistance, click here.

Pandemic response

The 2021 American Rescue Plan Act pushed out $24 billion of federal funding across the country to prop up child care providers and support families as the industry faced collapse.

Nationwide, that funding supported 80% of the child care providers in the U.S. and impacted about 9.5 million kids, according to the U.S. Department of Health and Human Services.

Oregon tallied a 5% increase in child care slots from March 2020 to December 2022, according to Oregon State University research. Chatterjee said the American Rescue Plan funds played a big role in that increase, along with the state’s more than $400 million investments in early learning through the Student Success Act. 

But now that the federal funding has ended, about 70,000 care centers will likely close nationwide, and more than 3 million kids could lose their care, according to The Century Foundation, a New York-based think tank.

And that is not the only blow to low-income families. The disappearance last year of the child tax credit for low-income families doubled the number of children in poverty.

In response, during this year’s session, Oregon lawmakers passed a statewide version of the tax credit for households with young children earning $30,000 per year or less. 

Chatterjee said that Oregon probably won’t be hit as hard as most other states by the loss of funding, but she said the impact will mostly affect Employment Related Day Care. That’s because the state already spent the bulk of its American Rescue Plan funding, about $250 million, on direct grants to stabilize providers. About 3,350 Oregon providers received stabilization grants, and most of them accepted families on Employment Related Day Care, according to the agency.

While the stabilization grants were temporary, one-time allotments, lawmakers are using about $97 million of the American Rescue Plan money for fundamental parts of Employment Related Day Care.

Beefed-up subsidies

Until recently, the subsidy program didn’t have enough resources to make it worth applying to for many families, Chatterjee said. Families were routinely wait-listed, including Quevedo, who was on a waitlist for more than a year after she had qualified for help. 

Then, Oregon beefed up the subsidy program with changes to state law and funding from the American Rescue Plan. A bipartisan group of state lawmakers in 2021 expanded eligibility for the subsidies to support students, families receiving federal welfare help and, next year, undocumented families. Chatterjee, then working for former Gov. Kate Brown, helped write that bill, which also created the Department of Early Learning and Care to help streamline state programs. 

The loosened requirements went into effect this year, and participation in the program spiked. About 9,230 families participated in the program in February 2022. That rose to about 14,000 families this August.

The new law also increased the program’s benefits to families by cutting the copays that families must pay to receive the subsidy. These copays were often too high for families to afford, said Courtney Veronneau, senior policy director at Family Forward.

In 2016, copay costs averaged almost one-fifth of a family’s income in Oregon, the second-highest rate in the U.S, according to the National Women Law Center. 

The new law capped these copays at no more than 7% of a family’s annual income. To fund the policy, the state tapped into the American Rescue Plan dollars.

Chatterjee said the arrangement successfully made the program more affordable for families and proved its worth. In 2022, after the new law and federal funding arrived, Oregon had some of the lowest copays in the country. 

“It makes this program work for families,” Chatterjee said of the federal funds.

However, Veronneau said the early learning department may have to raise copays as the federal funding dries up. 

Agreement to boost state funding  

For Veronneau, the agency’s predicament was predictable. She said child care advocates were “screaming from the rooftops” during the 2023 legislative session that lawmakers were under-funding Employment Related Day Care just as their planned expansion of the program would take off.

During the long session in June, the Legislature allocated an additional $23 million for the subsidy program above its previous service level, which is considered a baseline. 

Meanwhile, Family Forward sought an additional $100 million for the program. In June, days before the session ended, Family Forward and other advocacy groups placed 1,000 pinwheels on the Capitol Mall to symbolize families that could lose Employment Related Day Care benefits because of lack of funding. 

Veronneau called the 2023 session “a missed opportunity.”

Some legislators feel similarly. Rep. Lisa Reynolds, D-Portland and a pediatrician, chaired the House early childhood committee. She said in an interview that the current funding amount for the subsidy program is “terrible.” 

“We need to keep making the case that we need more, more, more,” she said. 

However, she said budget writers including Rayfield must balance a slew of competing demands for funding. 

Rayfield said the spike in subsidy recipients this year was a positive development, but one that was hard to predict and thus hard to accurately fund. He said that advocates and lawmakers are on the same page about raising funding next year. He’ll work with the governor’s office and the early learning department to land on an adequate funding amount, he said. 

“I will be personally working to fund whatever that number is,” Rayfield said.

For the moment, Quevedo’s situation is stable, but she hopes she doesn’t lose the benefit, and that lawmakers  increase funding so that people on low incomes like herself don’t have to quit their jobs or lean on relatives or friends to keep their children safe.





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Grant Stringer
Grant Stringer

Grant Stringer is a freelance journalist in Oregon who writes for national newspapers like the Washington Post and outlets in the West, including the Capital Chronicle and the Oregonian/OregonLive. He specializes in features, solutions journalism and social policy stories.