Understanding Child Care and Pre-Kindergarten Provisions in the Build Back Better Act
Updated January 2022 to reflect the Senate HELP committee draft bill released December 2021
The most recent version of the Build Back Better (BBB) Act includes historic investments in child care and pre-kindergarten. These investments create a child care entitlement for most children from birth through age five and universal preschool for three- and four-year-olds, provide significant increases to access for families and children, improve the quality of the programs, and increase pay and support for providers. The U.S. House of Representatives passed this bill on November 19, 2021. The measure is now being considered by the Senate.
This fact sheet outlines key provisions of Section 23001 Birth Through Five Child Care and Early Learning Entitlement and Section 23002 Universal Pre-Kindergarten included in the Build Back Better Act.
What funds are available and how will they be allocated?
To carry out the child care provisions of the BBB Act, the U.S. Department of Health and Human Services (HHS) makes funding available to states beginning in FY 2022, with entitlement funding (where funds are allotted as necessary to serve the population of eligible children and families) beginning in FY 2025. Of the bill’s investment in child care and pre-kindergarten, $100 billion will be allocated to the Birth Through Five Child Care and Early Learning Entitlement and distributed as capped funding to states over the first three years. The available funding in those first three years will be:
- $24 billion in FY 2022,
- $34 billion in FY 2023, and
- $42 billion in FY 2024.
Beginning in FY 2025, the funding adjusts to fit “such sums as may be necessary” or an entitlement structure. This structure includes a 90:10 cost sharing agreement that will require the federal government to cover 90 percent, and states to cover 10 percent, of costs associated with direct services and payment rates.
In the first three years of funding (FY 2022 – FY 2024), states are required to allocate:
- 50 percent of funds toward expanding access to subsidies;
- 25 percent to support supply building and quality activities;
- 18 percent to support expanding subsidy access or supply building and quality activities; and
- 7 percent to support expanding subsidy access, supply building and quality activities, or state administrative costs.
Following the first three years of capped funding, beginning in FY 2025, the BBB Act establishes federal-state cost sharing agreements for state expenditures associated with quality and supply building and state program administration activities. Costs for state quality and supply building activities will be reimbursed by the federal government according to the federal medical assistance percentage (FMAP) rates, which vary by state. States are required to reserve 5-10 percent of amounts made available in the previous year to support these quality activities. State administrative costs will be split so that the federal government covers half of state expenditures, and the state covers the other half.
Funds to carry out federal administrative, research, evaluation, monitoring, and enforcement activities for the program are also included in these resources. The annual funding for these activities includes:
- $172 million in FY 2022
- $220 million in FY 2023
- $225 million in FY 2024
- $230 million in FY 2025
- $235 million in FY 2026
- $240 million in FY 2027
How can states access funding?
States become eligible to access funds and receive assistance by submitting an application containing a state plan to the U.S. Secretary of Health and Human Services (Secretary) for approval. For a three-year period following the enactment of the BBB Act, the Secretary will award funds to states with an approved transitional state plan that covers up to a three-year period. Transitional plans, at a minimum, must include an assurance that a state will submit a full state plan. Following the transitional plan, states must submit a full plan also covering a three-year period that includes detailed information on how they will manage payment rates; licensing for providers; eligibility of families; prioritizing populations defined as underserved; compensation for care workers; and improving overall program quality.
While states are receiving these BBB funds, they must ensure stable funding for other child care programs. This is known as maintenance of effort (MOE). Specifically, states must maintain the same level of spending, on average, for other child care services as they did during the three years before receiving child care-related BBB funds. The expenditures from other child care programs can be used to count toward the non-federal share, or state match, of expenditures so long as they are not already being used as a match requirement for another federal award. States can also meet match requirements through state or local sources, donations, or in-kind contribution of facilities, property, equipment, or services.
Resources to Support Economic Stability, Affordability & Quality
What supports and resources are available for providers?
Under the requirements for full state plans, states must outline how they will use funds to meet the minimum requirements established by the Secretary—including supporting costs related to quality improvements. To support these costs, states are required to develop and implement a cost estimation model within three years after receiving funding. States must certify the model increases payment rates, wages, and access to professional development and training. The model must also account for variations in costs of direct services. In addition, states must certify that payment practices support the fixed costs of providing child care.
Cost estimation models and payment rates.
Payment rates must be based on cost estimation models. State cost estimation models must be developed within three years of a state receiving funds and done in consultation with community stakeholders. The models must reflect variations in the cost of care according to geographic area, provider type, and a child’s age, as well as the costs of providing inclusive care. The model should also incorporate the costs associated with providers operating at different tiers of quality including the costs of meeting higher standards within a state’s system of quality measures. In addition, states must update the cost estimation model at least once every three years. State payment rates must ensure that participating providers and all their child care staff are provided, at minimum, a living wage. In addition, providers who have similar credentials and experience to elementary educators must receive equivalent wages. States must also certify that wages are adjusted annually to account for cost-of-living increases and other increases that are incorporated into a wage ladder for eligible providers and child care staff.
Additional support for child care providers.
In addition to increased payment rates and wages, providers can access additional resources and supports through startup and supply extension grants from HHS. Providers supporting or seeking to provide care to children in underserved populations will be prioritized for grants. These grants can be used to support providers in meeting quality standards as well as remodeling, renovating, or repairing facilities. Further, child care providers can use these grants to support health and safety requirements to meet state quality standards and meet licensure requirements; make progress toward meeting higher tiers; and/or sustain quality, including increasing provider wages and supporting fixed costs. At the discretion of the Secretary, states can also award grants for construction, permanent improvement, or major renovations with some exceptions and limitations.
How do providers participate in the new system of supports and resources?
An eligible provider can be a center-based, family child care, or other provider of child care services who:
- Is licensed in the state in which child care services are provided;
- Participates in the state’s tiered system of measuring quality, no later than four years after a state receives funds; and
- Satisfies the state and local requirements for providers under the Child Care and Development Block Grant (CCDBG) Act.
To assist providers with transitioning to meet all the above eligibility requirements, there is an established three-and-a-half-year grace period, beginning when a state receives funding. During this time, providers who are eligible under the CCDBG Act will be deemed eligible for the three-and-a-half-year period.
Within two-and-a-half years after receiving funding, states must develop a licensing pathway and standards appropriate for child care providers in a variety of settings. This is to ensure providers eligible under the CCDBG Act have a pathway to meet the licensing requirements under the new child care provisions. States must demonstrate that they created the licensing pathway and standards in consultation with experts including child care directors, providers, staff, families, and others with early childhood education and child development knowledge.
Who is eligible to receive child care assistance?
Children and families will gain access to the program based on their families’ income and their parent or parents’ participation in eligible activities or if a child is included in a population deemed vulnerable. Eligible activities for parents include full- and part-time work, job search activities, and job training, as well as a variety of education-related activities. Eligible parent activities also include health treatments, including mental health and substance abuse treatment services, and activities related to preventing child abuse, neglect, and family violence.
Children included in vulnerable populations are those who are children with disabilities; infants and toddlers with disabilities; children experiencing homelessness; children in foster care; children in kinship care; and children who are receiving, or need to receive, child protective services or those residing with a parent who is more than 65 years old. States should ensure that once children and families are deemed eligible to receive assistance, they are not required to re-determine eligibility before 12 months. Additionally, states should implement the processes for determination and re-determination in a way that reduces barriers to enrollment, supports continuity of services, and supports child wellbeing.
Income eligibility limits, which are based on annual family state median income (SMI) thresholds, are phased in from FY 2022 – FY 2024, beginning with a maximum income of:
- 100 percent SMI in FY 2022;
- 125 percent SMI in FY 2023; and
- 150 percent SMI FY 2024.
If states can cover the required populations more quickly, they may use payments in the first three years to expand access to direct services that go beyond the income eligibility phase-in thresholds, but do not exceed 250 SMI. Beginning in FY 2025, income eligibility limits will be expanded to allow families with incomes up to 250 percent SMI to participate.
To support children and families in populations that are underserved, states must also prioritize increasing child care access, improving quality, and expanding the supply of providers within these populations. The bill defines “underserved populations” as children and families with low incomes; infants and toddlers; children with disabilities; dual language learners; children experiencing homelessness; children in foster or kinship care; and those receiving care during nontraditional hours. “Vulnerable children,” as defined by the lead agency, can also be considered priority populations.
How does funding address affordability for families?
States receiving funding must certify, through their state plans, how those funds will be used to expand access and improve affordability for families receiving full- or part-time care.
For families receiving full-time care, states must establish a scaled copayment structure where families earning up to 250 percent SMI will pay no more than 7 percent of their annual family income toward child care costs for all children in care.
Families earning incomes at and below 75 percent SMI will have no co-payment. Families earning above 75 percent will be charged copayments depending on their income level, as follows:
- Families earning above 75 percent and not more than 100 percent SMI will have a copayment of more than 0 percent and not more than 2 percent of their family income;
- Families earning above 100 percent and not more than 125 percent SMI will have a copayment of more than 2 percent and not more than 4 percent of their family income;
- Families earning above 125 percent and not more than 150 percent SMI will have a copayment of more than 4 percent and not more than 7 percent of their family income; and
- Families earning above 150 percent and not more than 250 percent SMI will have a copayment of no more than 7 percent of their family income.
To determine copayments for families who receive part-time care, states should establish a reduced copayment proportional to the amount of care received at the appropriate income eligibility threshold. In addition, states must use funds during the first three years of capped funding to waive or reduce co-payments to ensure any eligible family receiving financial assistance for eligible children pays no more than 7 percent of annual income toward the cost of care.
How do investments improve program quality?
States must have, or must implement, a tiered system for measuring quality for eligible providers. This system must include appropriate standards for center-based and family child care settings, and those offering non-traditional hours or serving children in different and/or mixed age groups. Standards for the highest tier of quality measurements must, at a minimum, be equivalent to Head Start performance standards.
States must provide sufficient resources and supports to assist providers in progressing toward higher quality standards, including by providing adequate funding. Such funding can be used to support workforce training and professional development including earning a degree and credentialing; developing, implementing, or enhancing state quality tiered measurement systems; improving the supply of programs and services for underserved populations; and improving access for children experiencing homelessness or in foster care. Funds can also be used to provide technical assistance to those providing care or seeking to acquire licensure to do so.
Tribes, Territories, and Other Entities
How can tribes and territories access funding?
Indian tribes, tribal organizations, and territories will be eligible to receive funding if they submit an application for approval that meets the requirements specified by the Secretary. In the first three years of capped funding, 4 percent is reserved annually for Indian tribes and tribal organizations. This funding level equates to the following amount per year:
- $960 million in FY 2022;
- $1.36 billion in FY 2023; and
- $1.68 billion in FY 2024.
Territories will receive no less than half of 1 percent to fund programs in the first three years. This funding level equates to the following amount per year:
- $120 million in FY 2022;
- $170 million in FY 2023; and
- $210 million in FY 2024.
Beginning in FY 2025, funding for tribes, tribal organizations, and territories will reflect an entitlement structure.
Can other entities apply to run programs?
In states that do not apply to receive funding, the BBB Act specifies that funds will be made available to eligible localities. Eligible localities are defined as a city, county, or other local government entity, or a Head Start agency. These funds will be made available through grants, which will be prioritized to localities that serve high percentages of children and families who are underserved. The available $19 billion in dedicated funding for eligible localities will be split between city, county, and other local government entities, as well as Head Start agencies, including Early Head Start agencies. Head Start agencies will receive 75 percent ($14.25 billion), other local entities will receive 25 percent ($4.25 billion), and all these funds will remain available for the duration of the program. In addition, the Secretary has the authority to reallot funds available between FY 2022 – FY 2024—from states without an approved application—to eligible localities and Head Start agencies in those states, in addition to participating states. The amount of reallotted funds for eligible localities will be based on how many states do not receive funding and how the Secretary decides to allocate those undistributed funds to states that take up the program in addition to localities, including Head Start agencies in states that are not participating. Beginning in FY 2025, the Secretary also has the authority to reallocate unobligated funds allotted from FY 2022 – FY 2024 to eligible localities. These funds will also be available to states, tribes, and territories that do not have such unobligated funds and that are currently participating in the program with an approved plan. Funding for localities will be allotted based on the number of children under age 6 from families with incomes below 200 percent of the federal poverty line within that state, proportional to the number of children who meet that income threshold in all states where localities are able to apply.
What funds are available and how will they be allocated?
To carry out the universal preschool provisions of the BBB Act, $18 billion in funding is available for FY 2022 – FY 2024 with an open-ended funding structure beginning in FY 2025. The open-ended funding that begins in FY 2025 allocates “such sums as may be necessary” and provides funding based on the number of children to whom states provide preschool services.
States would receive funds through HHS, with the Secretary of HHS and the Secretary of the U.S. Department of Education (DoEd) (Secretaries) responsible for co-managing program administration. Funds will be allotted to states based on a formula that considers the number of children who are under age 6 and whose families are at or below the 200 percent poverty line, when compared to all states with approved plans for the fiscal year in which funds are being allotted. In addition, the formula will also consider existing federal preschool investments through Head Start programs. States will use funds to cover costs associated with providing “high-quality, free, inclusive, and mixed delivery preschool services.”
The provisions also require the federal government to cover 100 percent of state expenditures for preschool services in the first three years, FY 2022 – FY 2024. The federal share of state expenditures for preschool services will gradually decline in the following years, to 90 precent in FY 2025; 75 percent in FY 2026; and 60 percent in FY 2027.
Included in the funds laid out above are amounts reserved to carryout federal administrative, monitoring, research, technical assistance, and other related activities. The funding amounts for federal administrative activities are:
- $165 million in FY 2022;
- $200 million in FY 2023;
- $200 million in FY 2024;
- $208 million in FY 2025;
- $212 million in FY 2026; and
- $216 million in FY 2027.
In addition, beginning in FY 2022, $2.5 billion will be set aside to improve compensation and benefits for Head Start staff and ensure compensation is adequate to attract and retain qualified staff and enhance program quality.
Beginning in FY 2025, the federal government will cover 50 percent of state expenditures for each fiscal year to support state activities including administration, quality improvement, outreach, building data systems, transportation, inclusive access for children with disabilities, and needs assessment. However, payments for state activities cannot be more than 10 percent of total state expenditures. States will use matching funds to cover all costs not covered by the federal government. In addition, unused funds from states that did not apply can be reallotted to states with approved plans from FY 2022 – FY 2024.
To draw down the full amount of available federal funds, states must meet MOE and federal matching—or non-federal share of costs—requirements. Allowable sources for the state match, or non-federal share, of direct service and other related costs include:
- Cash or in-kind, including fairly evaluated facilities, property, equipment, or services;
- Increased spending to expand half-day kindergarten programs into full-day programs, beyond the amount spent the day before the BBB Act takes effect; and
- Philanthropic and/or private organization contributions.
In addition, a state’s share cannot come from funds used as matching or as non-federal contributions toward other federal awards. Moreover, a state cannot use more than 100 percent of its current average spending, between 2019–2021, on pre-kindergarten programs.
For MOE requirements, states must maintain their per-child fiscal spending for their preschool programs—those funded under the BBB Act or other public programs—relative to spending from the previous fiscal year. States that do not meet these requirements risk a reduction of federal support, with some exceptions for states that experience unforeseen economic hardships, including natural disasters, or states that require reductions in specific programs and provide justification to the Secretaries.
How can states access funding?
States are eligible to receive funding when the state governor submits an application containing a plan for achieving universal “high-quality, free, inclusive, and mixed delivery preschool services” to the Secretary for approval. The governor will designate a lead agency (a state agency or joint interagency office) to administer the state preschool program. Upon approval, state plans will remain in effect for three years. Or states can opt to submit a transitional plan that contains the information required by the Secretary, and that at a minimum provides an assurance that the state will submit a full state plan. For full state plans, the information required by the Secretary, in collaboration with the DoED Secretary, includes certification of how the state will:
- Use developmentally appropriate, evidence-based standards;
- Prioritize communities that are defined as high-need and underserved;
- Improve the quality of existing programs to meet new standards and support overall continuous quality improvement, including degree and/or experience requirements for lead teachers;
- Meet state preschool education standards, which are at least as rigorous as Head Start standards, within one year after the state receives funding;
- Establish a mixed delivery system without reducing the total number of state-funded preschool programs from year to year for eligible children;
- Ensure access for children with disabilities;
- Make all preschool services universally available without additional eligibility requirements beyond those at the federal level; and
- Support professional development and increased wages.
What resources and supports are available for providers, teachers, and other staff—and who can access them?
Eligible providers can access funds through subgrants or contract awards in an amount sufficient to operate a universal, high-quality, free, inclusive, and mixed delivery preschool program. Provider subgrant and contract amounts will reflect variations in the costs of preschool services based on geographic area, provider type, age of children served, and any needs associated with providing inclusive care for children with disabilities. The state will award subgrants or contracts to providers for a period of three years, unless the award is terminated, suspended, or the award period is reduced. In addition, providers can receive enhanced payments if they offer preschool services to high percentages of children with low incomes.
Using those enhanced payments, providers can support comprehensive services; health and developmental screenings; and service referrals for the children and families they serve. Eligible providers can use funds for:
- Professional development, credentialing, and degree attainment for staff;
- Living wages for all staff, and setting salaries and salary schedules that reflect pay parity with elementary teachers for staff with similar education and experience;
- Continuous quality improvement supports for providers of preschool services participating, or seeking to participate, in the state preschool program;
- Materials, equipment, and supplies; and
- Rent or mortgage, utilities, building security, building maintenance, and insurance.
Eligible providers are those who provide services in states receiving funding. Specifically, they are defined as:
- A local education agency that acts alone, in a consortium, or in collaboration with an educational service agency;
- A Head Start agency or an agency funded under the Head Start Act;
- A licensed center-based, family child care, or network of licensed family child care providers; or
- A consortium of the types of providers and agencies listed above.
How does funding provide families free, high-quality, inclusive, mixed delivery preschool services, and how do families gain access?
Families are eligible if they are in a state that has submitted an application and received funding and if they have children who are three or four years old on the date established by the local education agency responsible for determining kindergarten entry. Eligible families will have free access through the available pool of eligible providers. The funds provided will ensure that the programs made available to eligible families are part of a system focused on continuous quality improvement. This will occur through the use of data, research, monitoring, training, technical assistance, professional development, and coaching.
States receiving funding must prioritize equity and inclusion for children and families. Before expanding to other areas, states must use funds to establish and expand preschool services within and across communities with high need and that are underserved—including children experiencing homelessness; children in foster or kinship care; children whose families engage in migrant or seasonal agricultural labor; children with disabilities; and dual language learners. States must also certify that children with disabilities have access to preschool consistent with provisions in the Individuals with Disabilities Education Act (IDEA) to support inclusive preschool programs.
To support a mixed delivery system, states must describe in their state plans how:
- The state preschool system will ensure any new slots will not disrupt the stability of infant and toddler care throughout the state;
- The State Advisory Councils on Early Childhood Education and Care will be consulted in how state slots are distributed;
- Partnership Head Start agencies and programs will be fully utilized; and
- New preschool slots will be equitably distributed among child care providers, including family child care, Head Start agencies, and schools.
Can tribes, territories, and migrant or seasonal families access funds?
The Secretary will reserve the following amounts from total funding to carry out activities under the universal preschool provisions for Indian tribes and tribal organizations; territories; and families who are engaged in migrant or seasonal agricultural labor:
- For tribes and tribal organizations: $2.5 billion, available until September 30, 2027;
- For territories: $1.25 billion, available until September 30, 2027, which will be allocated based on relative need, as determined by the Secretary; and
- For children and families engaged in migrant or seasonal agricultural labor: $300 million, available until September 30, 2027.
Indian tribes and territories seeking to participate and receive funds through this program must submit an application to the designated agency.
Can other entities access funds?
Funds will be available to provide universal preschool grants in states that have not received payments under the universal preschool provisions of the BBB Act. This will include dedicated funding of $19 billion, made up of $9.5 billion for all eligible localities, including Head Start agencies, and an additional $9.5 billion solely for Head Start. In addition, the Secretary has the authority to reallot funds available between FY 2022 – FY 2024, and from states without an approved transitional or full state plan, to eligible localities and Head Start agencies in those states, in addition to participating states with a full or transitional state plan. The amount of reallotted funds for eligible localities will be based on how many states do not receive funding and how the Secretary decides to allocate those undistributed funds to states that take up the program in addition to localities, including Head Start agencies. Beginning in FY 2025, the Secretary also has the authority to reallocate unobligated funds from FY 2022 – FY 2024 to an eligible locality or Head Start Agency, and these funds will also be available to states without unobligated balances that are currently participating in the program.
Funding for localities will be proportional to the number of children who are under age six and from families with incomes at or below 200 percent of the poverty line, when compared to all states that have not received payments. Eligible localities are defined as a city, county, or other unit of general local government; a local education agency; or a Head Start agency. A Head Start agency is defined as any entity designated, or eligible to be designated, as a Head Start or Early Head Start agency under the Head Start Act.
The Secretary will determine the requirements for eligible localities to apply for funding and operate preschool programs that are, to the greatest extent possible, consistent with requirements applied to states in providing universal, high-quality, free, and inclusive programs. The Secretary will prioritize entities serving communities with a high percentage of children from families with incomes at or below 200 percent of the federal poverty line.
The child care and pre-K provisions in the Build Back Better Act, was passed in the House of Representatives on November 19, 2021. The Senate’s updated version, which was released on December 11, 2021, and is reflected in this fact sheet, offers a historic and transformative opportunity to lower costs and increase availability of care for families, improve compensation and sustainability for providers, and address equity. This is a once-in-a-generation moment for children, families, providers, and our country that would have impacts for generations to come. The bill is under consideration in the Senate.