President Biden and the Democrat-controlled Congress are poised to continue the federal government’s spending spree, this time through a $2 trillion extravaganza named Build Back Better (BBB). Just before Thanksgiving, the House of Representatives narrowly passed its version of the measure, and the Senate is mulling possible changes to the package as pressure mounts for passage before Christmas.
The spending plan would pay for an assortment of climate change and social programs, including a massive expansion of childcare and preschool. Should it pass, the Congressional Budget Office estimates that a near-universal childcare subsidy would add about $273 billion to the federal budget over the next decade, while a universal preschool program would escalate spending by $109 billion during that period.
Those numbers, however, underestimate the eventual cost of the programs, as BBB doesn’t provide funding for either of them after FY 2027. If both are reauthorized, the Committee for a Responsible Budget calculates an added expense of roughly $800 billion in the 10-year budget window.
Those big numbers reflect only federal outlays. A full accounting requires consideration of the fiscal impact on state budgets as well.
Akin to a promo rate or loss leader, the feds would pick up the entire tab for expanded childcare and preschool in Fiscal Years 2022–24. Thereafter, states are on the hook for covering part of those costs – should they choose to participate in these programs.
Here’s the fine print:
- Childcare: Starting in 2025, states would cover 5% of the “direct services” costs – the bulk of the childcare outlay – with higher rates applying for “quality activities” and administration. Perhaps averaging across those categories, the Senate Republican Policy Committee cites a 10% state share for childcare.
- Preschool: Starting in 2025, states would cover an increasing share of the universal preschool cost. States would cover 5% of the cost in FY 2025, 20% in FY 2026, and 36% in FY 2027.
In addition to their required shares, states should also be concerned about the bill’s provisions that are likely to increase childcare and preschool costs. The Senate Republican Policy Committee highlights some of the requirements. Among those for childcare, states must “establish wage scales for childcare staff and ensure staff are paid a ‘living wage’ equivalent to wages of elementary school teachers in the state with similar experience and education.”
For universal preschool, meanwhile:
- States must ensure that the preschool services funded by the program are free, universal and do not have any additional eligibility requirements.
- Preschool programs must be provided as a six-hour school day, school year program, and states must provide transportation as with public K-12.
- Preschool teachers must have a B.A. degree in early childhood education.
- The bill requires states to provide salaries to preschool staff that are equivalent to the salaries for elementary school staff with similar experience and education.
There’s much commentary and analysis about the merits of expanding public childcare and preschool programs. For now, we’ll leave those debates to others. But one thing is clear: There are serious costs to making these programs a universal entitlement, both to the federal government and to states. States can opt out of these programs at any time, either on the front end or, more perilously, when the state share comes into effect. Should BBB pass, only time will tell whether state policymakers feel the federal “incentives” are worth the squeeze.