Child care financing reform: A critical next step for Michigan families and the economy




The worldwide COVID-19 crisis raised awareness of both the importance of child care to the state’s economy and the fragility of child care businesses. Child care providers were struggling to make ends meet for their businesses long before COVID-19 shut many down, and those that remained open could manage only with an infusion of federal relief funds.

Bold changes in the financing of child care are urgently needed

The current financing system for child care doesn’t make sense and doesn’t work for child care providers, parents or children. Unlike K-12 public schools, child care is “funded” predominantly by parents and underpaid child care professionals, and is not considered a public good.

Child care is not affordable for many Michigan families: Child care for one infant consumes 19% of the income of a family at the state’s median income, and 55% of income for a parent working at minimum wage. Care for children often exceeds the cost of mortgage or rental payments, and rivals college costs.

Child care businesses are struggling. Child care is unaffordable for many parents, but not because child care workers are earning a living wage. Early childhood educators are some of the lowest paid professionals in Michigan, earning less than fast food cooks, laundry workers, and animal care-takers.1

Michigan’s investment in child care has declined over the last decade

Few families were eligible for assistance: Leading into the COVID-19 public health and economic crisis, Michigan had the second-lowest income eligibility threshold for child care in the country, leaving many families without any chance of finding affordable care. While the threshold was increased to 150% of poverty in January 2021, it still falls well below the national median of roughly 185% of poverty.

Child care subsidy payments to providers have remained low, and are well below the inadequate, depressed market rate used as a guide. The state reimburses providers at rates that are so low that half of the state’s child care workers are themselves eligible for some form of public assistance, and many have been forced out of business.

Michigan dedicated so few of its own resources to child care that for several years it led the nation in the amount of unspent child care funds that were returned to the federal government to be redistributed to other states.

Michigan returned federal Child Care Development Fund (CCDF) dollars: Between 2014 and 2017, Michigan failed to provide adequate state matching dollars to draw down all of the federal child care funding it was entitled to.2 Michigan reached the point of returning needed federal dollars by restricting eligibility and payments to child care providers. In fact, between 2003 and 2020, the number of families receiving child care subsidies in Michigan fell 69% and child care spending fell from $499.2 million to $217.0 million.

Michigan has also been at the bottom of the states in its dedication of federal Temporary Assistance to Needy Families dollars (TANF) to child care. Between 2011 and 2020, Michigan did not dedicate any federal TANF block grant dollars to the child care subsidy, although $12 million in TANF was included for child care in the final 2021 budget—the first TANF investment in the child care subsidy in a decade.

Michigan is not investing significant state funds in child care. Although Michigan has been drawing down all available federal Child Care Development Fund dollars since 2018, it does not spend more than the minimum state funds needed as match for federal child care dollars.

Next Steps for Child Care in Michigan: To create a high-quality and thriving child care market, the state will need to put in place a financing plan that supports adequate wages for child care professionals, and expands the supply of high-quality care for infants and toddlers.

At the core of child care reform in Michigan must be a strong focus on equity—in recognition of the impact of racism on economic security in communities of color, as well as the high number of child care “deserts” in many of the state’s rural communities. Child care workers are disproportionately women, including many women of color who receive very low wages and seldom have access to benefits like health insurance or paid sick time. And, in a very low-paying field, African American and Latinx workers are paid less than their White peers—even after accounting for education levels.3 We can’t fix Michigan’s child care system without tackling those inequities head-on.


Target new child care funding to communities with the greatest need and least access to high-quality care, with a focus on equity while expanding access to high-quality care for infants and toddlers.

Continue to increase both the supply and demand for child care by simultaneously:

  • increasing child care subsidy reimbursement rates for all providers, including enhanced contracts for child care businesses caring for infants and toddlers in areas of low supply and high need; and
  • increasing initial child care eligibility to 185% of poverty.

Support home-based child care providers by forming staffed family child care networks that can reduce their isolation, and make it easier for these small businesses to operate by creating shared services solutions.

Support statewide socioemotional consultants to support child care providers who are working with children with high levels of stress and challenging behaviors.

Require an annual comprehensive child care system financing plan that includes child care investments in multiple state departments, and that adequately supports Michigan’s child care system.



  1. The May 2019 State Occupational Employment and Wage Estimates, Michigan, Occupational Employment Statistics, U.S. Bureau of Labor Statistics at
  2. CCDF State Spending Under the Fiscal Appropriation (Years 2014-2017), Office of Child Care, Administration for Children and Families,
  3. Sethi, S., Johnson-Staub, C., and Robbins, K.G., An Anti-Racist Approach to Supporting Child Care Through COVID-19 and Beyond, Center for Law and Social Policy (July 2020).




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