Descriptive analysis of child care stabilization base grants
Minnesota’s Child Care Stabilization Grant Program endeavors to provide child care providers with financial support to maintain operations and increase staff compensation. These grants, funded with federal stimulus funding through the American Rescue Plan Act, began in September 2021 and are available to eligible child care providers through June 2023. This report uses data from the Department of Human Services’ Child Development Services (CDS) and the Office of the Inspector General (OIG) to examine three pressing policy questions:
- How did the stabilization base grants affect compensation for staff?
- How did closure rates differ between recipients and non-recipients of the base grants?
- How did providers’ enrollment and capacity change after the distribution of the base grants?
Overall, base grants were associated with a 5.5 percent increase in cumulative monthly compensation per staff hour worked for child care providers. Compensation increases tended to be concentrated in larger, center-based providers in the seven-county Minneapolis-St. Paul metropolitan area. Across the whole study period, family child care providers with staff—about 20 percent of family child care grant recipients—did not report increases in compensation, but this may be due to the way that family child care proprietors think about and report to DHS their own compensation. Our results also suggest that the base grants may have prevented the closure of family child care providers; family child care providers that received the grant had a lower risk of closure than non-recipients (26% of non-recipients closed vs. 5% of recipients). Differences in closures were less pronounced for center-based providers.
We find little evidence that base grants increased enrollment or capacity for providers. While there was enrollment growth over the analysis period (September 2021 through June 2022) for providers, it came after reductions going into the school year, meaning it is most likely a return to normal enrollment levels. Additionally, the number of staff and staff hours did not meaningfully change during this period. Taken together, the base grant program appears to have met many of its policy goals. Providers that participated did, on average, increase compensation and were less likely to close than providers who did not receive the grants. This research is not designed to determine causality or to tell us if the program caused these changes. There are likely many factors that impacted both the decision to apply for grants as well as compensation and closures. However, given the stark challenges in ensuring sufficient supply of child care, the findings are notable.
Importantly for future policy, we see that the program had different benefits for different types of providers. Licensed centers and certified centers reported increasing compensation. Family child care providers who employ staff did not show, on average, compensation increases. Receipt of the grant was associated with markedly lower likelihoods of closing for licensed family child care providers. These findings portend a need for any future policies to support the child care market to be designed in a way that accommodates providers’ circumstances and the realities of different business models.