How to Fix Child Care in Maryland

We have a child care crisis in Maryland. There is no better untapped resource right now for growing our economy than investing in child care. The most efficient way is to make large increase to child care tax credits and subsidies that will pay for themselves several times over through increased parental productivity and more efficient development and education of the next generation.

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Originally published 1/29/17 on MoCoMSCCA.org/blog

We have a child care crisis in Maryland. Each year, more and more families find that they cannot afford the cost of child care. Yet child care programs cannot make child care cheaper, and even now, have a difficult time attracting and retaining quality teachers to such a low paid and demanding profession.

Research has been mounting about the importance of brain development in children from birth to five years old. Children who are not in quality environments during these critical years, especially birth to three, experience cognitive and developmental delays that put them behind their peers and can limit their potential for the rest of their lives.

Research has also been mounting about the economic impact of quality child care. Not only does it allow parents to be more productive contributors to our current economy, the impact quality child care has on our children makes them more productive contributors to our future economy. Along the way, quality child care saves us money in terms of less of a need for costly remediation, which is often unsuccessful, in K-12 education. Those children who have quality early childhood experiences have less need for social services, fewer contacts with the criminal justice system, and achieve higher levels of education and future earnings. With the latest economic research from economist James Heckman showing a return on investment of 13% per annum, or about $6 for every dollar invested, and the latest polling data showing significant support across both political parties, it no longer seems a question of “if” public money should be supporting child care, but when we will start and how we go about it.

The answer to the first question is as soon as possible. Because it has such a high return on investment, the money required is just the initial investment which will pay itself back several times over in the coming years. Imagine if we had continued to support the State’s families with the level of tax credits and subsidies that we did thirty years ago so that they had all been able to afford the quality child care they needed. Rather than facing a $500,000,000 shortfall this year, Maryland could be experiencing a significant surplus.  

There are approximately 350,000 children under 5 in our state. The annual cost of unsubsidized, full time child care can range from about $12,000 to $26,000 depending on the age of the child, child care setting, and geographic areas of the state (the range may be even broader in some parts of the state). Using an average of $15,000 per child, this means that it would cost a total of about $5.25 billion to provide care for these children. The U.S. Department of Health and Human Services defined child care to be affordable for a family when it is no more than 10% of their annual income. For families with two children, this means that even families making $300,000 per year can be over the 10% mark when they have two children in the birth to five range. This is important. Many legislators think that the problem is just with low income families. We have to understand that most families, well above the State’s median household income of about $79,000, are struggling. If we estimate that families can afford to pay about half of the total cost, with those at the higher end paying more and those at the lower end paying less. This means we need to ramp up to about $2-3 billion annually from a combination of Federal, State and local government support. However, the return on investment could be as much as $12-18 billion in a combination of added revenue and reduced need for spending.  

This brings us to the question of “how” we do it. Thirty years ago, we were doing it well through a combination of tax breaks and subsidies. However, the number of families where both parents worked was less and the cost of child care was less. As more parents entered the work force and the cost of care increased, subsidies and tax relief did not keep pace. But this method worked and it is the most efficient and comprehensive way to support families and boost our system of child care. Tax credits and subsidies help increase the purchasing power of parents so that they can get the type of child care that best meets their family’s needs. This helps with infant care, toddler care, part time and half day care, Montessori or play-based care, home-based family child care, preschool, and before and after care, in whatever combination that our families need. Tax credits and subsidies can also be structured in ways that keep market incentives in place so that child care providers need to compete for business and are rewarded through the market when the quality of care they provide is highly sought after by parents. Tax credits and subsidies can also be structured to incentivize parents to further their training and education and increase their income. They can be structured in a way so that they truly are an investment in our working families and our future work force.  

Some have been pushing for Universal Pre-K as the solution. But how does this help families who, in some areas of the state, are facing a cost of $20,000 per year or more for infant care and a shortage of available spaces?  Universal Pre-K is not a comprehensive solution to our child care crisis and addresses only one year of need. The brain development research and the economic research showing such a high rate of return on investment are based on investing in child care starting at infancy. In addition, the models for Universal Pre-K, even those using a “diverse delivery system,” incorporating private child care programs, are simply an expansion of the public schools down to younger children. Private programs would be forced to conform to a standardized curriculum and method of operating to achieve a “uniformity of quality.” As many programs rely on the tuition for older children to help make infant and toddler care as affordable as possible, the low reimbursement levels from Universal Pre-K will make such programs no longer economically viable. This is why there is such a shortage of affordable infant care in DC and other jurisdictions that have pursued the Universal Pre-K model.

What Maryland should do is to recognize that the best use of our tax dollars is to invest them in ways that grow our economy. There is no better untapped resource right now than investing in child care. We should set a 10 year goal to get to a point where families are not paying more than 10% of their income for child care. We should start by increasing subsidies and tax credits as much as we possibly can each year until we reach that goal. That is part of the elegance of this approach – it can be done incrementally and each boost to tax credits and subsidies helps another chunk of families. Let’s make Maryland the example for the rest of the country about how to grow economically by investing in our working families, our children, and our future.

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