The blog of the Urban Institute
June 10, 2021

Contracts Can Support the Child Care Workforce but Require Thinking outside the Box

During the COVID-19 pandemic, the child care and early childhood education (CC/ECE) workforce has faced severe instability. Lower enrollment, income loss, higher operating costs, and increased fears of health risks, combined with preexisting challenges, including low pay, inadequate benefits, high turnover rates, and demanding work, have left the field in turmoil. These challenges are acute for Black, Latina, and Native American providers, who make up more than 35 percent of the (PDF) CC/ECE workforce. To prevent permanent job loss and damage to a field dominated by women of color, states must act now to stabilize and support the CC/ECE workforce.

Since March 2020, Congress has passed three new child care investments as part of COVID-19 relief packages, totaling more than $50 billion. After conducting a field scan and expert interviews of strategies to support the workforce in fall 2020, an Urban research team began to look more deeply at one way policymakers could use federal money to support the child care workforce.  Specifically, by establishing contracts that provide funding for a set period, state administrators can help stabilize the workforce and allow providers to make sustained improvements.

With little information available about using contracts to support the child care workforce, we convened 26 experts, including state administrators, researchers, stakeholders and advocates, to think outside of the box about different ways contracts could support potential advancements in specific workforce goals and to address inequities affecting the workforce. Building off insights from that meeting, we developed and released two reports, one focusing on using contracts to support the workforce and one focusing on core principals to designing and managing a child care contract. Together, these reports highlight four lessons for policymakers interested in using contracts.

1) Contracts need to be designed for equity

Participants in our meeting were concerned that traditional contract strategies can limit public resources to individuals and programs with the resources and experience to successfully meet contract conditions. Although agencies are likely to need to know whether the recipient can meet contact requirements, unless implemented with an equity lens, this practice could direct supports to those who already have relatively more resources rather than to the workers and providers who most need investments.

States and funders can improve equitable access to contract resources by ensuring the application process is accessible, working with providers and community organizations to support a diverse pool of applicants, getting the word out to individuals and programs with inequitable access to resources, funding individuals to function as contract advisors, considering the unique needs of smaller home-based providers, and designing contracts to directly address systemic inequities.

2) Contracts are a flexible tool

Although traditional contracts can help support the child care work force, the true power of contracts lies in the creativity of their design. For instance, contracts can be linked or unlinked from subsidy slots. Instead of linking provider funds to a set number of slots for children, as many contracts have traditionally done, state administrators can design contracts that focus on staff and equitable, stable supports.

Contracts can also target individuals or programs, or they can work through intermediaries that provide supports to workers or programs, with the policy goal dictating the contract’s recipient. If the goal is to increase supports to workers with specific characteristics or specializations, policymakers may choose to contract with individual workers. But if contracts are designed to support workers who are employed by specific kinds of programs, then contracts with programs may be the best approach. In cases involving specialized supports, or where there are too many recipients for the state to easily manage, the contract can be with an intermediary that delivers the services or supports for the workforce.

In all these approaches, these contracts can be targeted to support higher salaries or income, increased benefits, and/or greater access to professional development.

In our report, we describe 33 ideas generated by our convening participants that illustrate different ways to use contracts to support the workforce. One proposes creating contracts to allow targeted programs to make up the difference between the amount received from subsidy funds and payments from parents and the amount needed to improve staff salaries and benefits. Another suggests developing a contract to establish a pool of local staff substitutes to allow for vacation, time off for respite care, and/or training or participation in communities of practice. Another suggests establishing a contract with organizations that help workers access public safety net supports.

3) Policymakers have many options to pay for contracts

Although pandemic relief funds provide an unexpected opportunity, they are not the only funding source. State administrators can also pay for contracts through the Child Care and Development Fund, the tax system (refundable tax credits), and other flexible funding sources -- such as state and local relief funds, state funding initiatives, and philanthropic funding-- and programs that also have child care and early education workforce goals, like the Child and Adult Care Food Program.

4) Contracts involve detailed logistics and planning

Contract-based financing includes some of the most complex state government systems. State administrators interested in this approach are best served by detailing a plan before implementing contracts with providers or other recipients to ensure the entities receiving a contract are not overburdened by paperwork and requirements. These plans should include timelines, transparency, capacity, data systems, reporting requirements, needs and definitions, roles and responsibilities, performance-based contracting, and targeted contracting goals. Further details on logistics or using contracts can be found in our brief, “Contracting in the Child Care System: Key Steps to Support Equity and Accountability.

Contracting is a critically important approach to meeting a broad range of child care system goals, including improving access to care, supporting the quality of care, expanding supply, and supporting the workforce. But the success of using contracts as a means to address the challenges facing the CC/ECE workforce depends on the extent to which contracts are designed creatively and with a focus on equity.


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