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Understanding the Child Care Fiscal Cliff in North Carolina

There is a fiscal cliff looming for North Carolina child care providers and it could have a dramatic impact on our economy.

How Did We Get Here?

Federal child care funding flowed to North Carolina during the pandemic to the tune of about $1.8 billion and 97% of eligible programs (over 4,540 programs) received stabilization grants. The largest share of that funding, just over $1.3 billion, arrived via ARPA.

These funds allowed North Carolina’s child care infrastructure to continue running through the pandemic. Originally set to sunset in December 2023, legislation passed last year allowed the funding to continue until June of this year.

When the grants sunset, the federal funding from child care will shrink from about $1.3 billion to about $400 million, the typical federal funding for North Carolina’s child care programs.

What’s the Damage?

Representatives of the NC Child Care Resource and Referral Council recently presented to members of the NC Chamber Federation as well as the NC Chamber Coalition on Child Care.

The council conducted a statewide survey of North Carolina’s child care programs to better understand the anticipated impact of the end of Stabilization Compensation Grants on child care programs, children, and families served. Nearly one third of the state’s child care programs participated in the survey.

The results are sobering.

  • Three in ten programs are expected to close when the stabilization grants sunset. That is more than 1,500 programs – an estimated 30% of family child care and 28% of child care centers.
  • The survey found 88% of programs expect to increase parent fees.
  • About two-thirds of programs expect difficulty in hiring comparably experienced and educated staff.
  • More than half of the respondents have already raised tuition fees in anticipation of the sunset of the grants.
  • More than 4 in 10 expect to close or combine classrooms.

Most respondents are implementing cost-cutting measures and looking at raising registration and late fees as well.

One respondent remarked, “Seriously what are we supposed to do? Can’t afford to pay the teachers what they are worth to be paid in order to keep them. What are we supposed to do?”

Why Does it Matter?

Without access to affordable, safe childcare, a parent cannot go to work. Additionally, high-quality early care helps families raise healthy, capable children and build strong communities.

The NC Chamber Foundation’s research clearly identified that North Carolinians see a child care crisis—and it is negatively impacting the state’s economy.

Lack of quality, affordable child care is causing parents to leave the workforce or turn down opportunities—exacerbating the state’s labor shortage and threatening business and economic growth.

What Can You Do?

Get engaged. We need your voice and engagement with the NC Chamber’s Coalition on Child Care. Join us to stay up to date and learn how to use your voice.