Child Care Reimbursement Subsidies: What They Are & Why They Matter

On Thursday, September 21, 2023, over 200 leaders, advocates, and professionals joined Starting Point for our 3rd annual Billie Osborne-Fears Community Forum. The event focused on innovation and moving the child care industry forward with action and funding. This year’s keynote speaker was Sarah Siegel Muncey, Co-President and Chief Innovation Officer of Neighborhood Villages, a systemic change-oriented non-profit organization striving for accessible, affordable, high-quality early childhood education. The crowd was treated to remarks and a poetry performance from Cuyahoga County’s Poet Laureate, Honey Bel-Bey along with one of her students from Youth Representatives.

Our conversation on innovation in child care sparked a conversation on funding—specifically reimbursement subsidies in child care and their importance to the parents, children, and child care programs they serve. Families that utilize child care programs know just how challenging it can be to pick the right environment for their child to spend their days learning, growing, and having fun. A number of criteria impact a family’s final choice of child care provider. Location, curriculum, staff, and overall environment all play a role in the decision-making process, but those are often outweighed by a larger looming factor—cost. According to the 2023 Kids Count Data Book, Ohio’s child care costs are among the highest in the nation when compared to household income. The report shows that the average cost of child care in the state is $235.25 per child, per week—$941 per child, per month—which is 11% of the average household income or 39% of the average single-parent income. For families who fall below these average income levels, finding quality, affordable child care is an immense struggle. The state and federal response comes in the form of child care cost subsidization through the Publicly Funded Child Care (PFCC) program. In Ohio, this solution is currently proving to be better in theory than in practice, as the state ranks lowest in reimbursements for child care benefits.

Child Care Reimbursement Subsidy Basics

Parents and families that have needed to rely on child care benefits to help subsidize their child care costs will tell you that they are often confusing and limited—especially in Ohio—in terms of the child care opportunities they provide. The primary source of confusion is the language around which these subsidies are built in terms of what they provide families. In a recent report, Ohio was listed as one of four states that are at the bottom of national child care reimbursement rankings because they only reimburse providers at the 25th percentile of a family’s local market. While that language may make sense to legislators and finance professionals, it’s likely more jargon than the typical family is comfortable with. This language really means that programs that accept PFCC for payment are getting paid at 25% of the true cost of care for the service they provide. 

As if this limited market is not challenging enough for Ohio’s low-income families, child care providers are not required to opt-in to subsidy programs—many don’t because the amount the state pays is significantly lower than the actual rate they charge. For example, the base reimbursement rate for child care in Cuyahoga County for a toddler is $218, but the true cost of care is typically $350 per week. To calculate the true cost of care, one can use the calculator from CostofChildCare. It’s important to note that child care programs aren’t balking at this $100+ difference out of greed, but instead out of necessity. There is a child care crisis in the United States, and many believe that improving equitable access to quality child care is the first major step in its resolution. Many programs are also choosing to not participate in PFCC because they are meeting their financial needs through enrollment. This automatically creates a significant equity gap for lower-income neighborhoods, who have no choice but to accept PFCC. This then makes child care options for lower-income children and families limited and may not meet their needs, due to the lack of funds. Starting Point CEO Nancy Mendez recently spoke with Idea Stream’s “Sound of Ideas” about the intersection between the lack of child care access and the consistently low wages and increasing staff shortages. The salient takeaway from the segment is clear—unless this crisis is addressed, our kids’ educational foundations are at risk.

The Impact of Improved Child Care Subsidy Access

The federal government has mandated that Ohio improve its rates to at least the 50th percentile—or families having access to the least expensive 50% of child care options—by the end of 2024. Ideally, the U.S. Department of Health and Human Services would like to see states increase all the way to a 75% threshold. This would mean that child care providers who accept PFCC for payment are reimbursed closer to market rate, or true cost of care. This increased access would immediately and greatly impact Ohio families, and the child care programs themselves would also benefit. Increased enrollment in child care programs coupled with government subsidy support would allow for an increase in staff salaries, which could help turn the tide on the increasing staffing shortages and high job turnover that the child care industry has been experiencing since the onset of the COVID-19 pandemic in 2020. It might surprise many to know that even with the noted high tuition costs at many child care facilities in Ohio, the median annual salary of a staff member is only $28,520—that’s less than 98% of other professions in the United States. Improving the ability of child care programs to hire and retain high-caliber staff is critical to ensuring that all children receive the early education opportunities they deserve, which will also ensure that more parents will have the ability to join the workforce and promote further economic growth in their communities and the country.

Looking for Childcare support? Starting Point can help! Please connect with a Family Resource Navigator today to learn more about how Starting Point can help you navigate financial responsibilities and provide an equitable child care experience for your child. Call us today at 216.575.0061.

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