Episode 17:Federal Shutdown & Bipartisan Breakthroughs: What Employers Need to Know

In this quick-hit episode, Greg and Doug break down three timely topics every employer should track:

• Federal shutdown implications for childcare: potential CCDBG disruptions, what’s likely, and how to support employees if subsidies pause or payments lag.
• The Child Care Modernization Act (SB 2828): bipartisan momentum, key provisions to fix provider payment rates, increase supply, and support mixed-delivery care—and why appropriations still matter.
• Colorado’s playbook: why the state ranks high on family resources, and market lessons on aligning employers, providers, government, and tech to actually move the needle.

Why it matters: Childcare is workforce infrastructure. When care is unavailable or unaffordable, employers lose talent and productivity. Get the signals to watch and practical moves to prepare.

Chapters

• 0:00 Cold Open and Episode Setup
• 2:40 Why the Shutdown Matters for Child Care
• 3:15 CCDBG 101 and Funding Risks
• 5:30 Provider Cash Flow and Family Impact
• 8:30 Introducing the Child Care Modernization Act
• 11:30 What the Bill Changes: Rates, Supply, Options
• 15:30 Business Backing and Workforce Framing
• 18:30 Colorado’s Model and Family Support Rankings

Transcript

SPEAKER_00: 0:02

Welcome to the tax break breakdown with your host Greg and Doug. On to the show.

SPEAKER_01: 0:16

Welcome everybody. Episode 17 of the Child Care Tax Break Breakdown with your host, Greg and Doug. This is episode 17. Federal shutdown and bipartisan breakthroughs. What employers need to know?

SPEAKER_00: 0:31

The government is shut down to know.

SPEAKER_01: 0:32

There's other stuff. There's other stuff. Yes, we're not shut down. A busy day. But obviously, this is news, and there's impacts that could happen to childcare, and our podcast is all about the child care tax break breakdown, which I think go it goes against also us as people wanting to keep things simple. But our podcast has like it's a crazy acronym, which I actually think is kind of ironic and funny. And I think we should keep it and roll roll with it. I agree. So a couple topics to talk about last week, and this is crazy. We've actually done two episodes now. Well, actually, it's a new month, so sorry. One a month, maybe.

SPEAKER_00: 1:28

Maybe if we're lucky.

SPEAKER_01: 1:29

But we're trying some new stuff here where it's just topic comes up, let's just get on 20 minutes and talk about it, instead of trying to be perfect on it, you know, and I think that is what we're trying to do today. Um, so may not be as organized, but last week was episode 16. We talked about New Mexico, universal child care and the Iowa employer grants. So if you want to know a little bit about the universal child care and what New Mexico is doing as a state and how that helps employers, you can listen to that. And then Iowa was basically giving out money. Um, it was a limited time amount on money because they used ARPA dollars, but still, there was a good amount of companies that got, I think one company got 1.9 million. It was not just companies, but it was a significant amount of money. They focused on companies that were basically building on-site centers. So Dan Foss manufacturing got some dollars to build a center. Uh, today we're gonna talk a little bit about the shutdown potential, not definitive impacts on childcare that you may want to know. Uh, there's a new child care modernization act, so it's a bipartisan bill that was introduced uh mid-last month in September. And then also there's been some um rankings of family resources by state. And guess what? Colorado ranked up really high, which is no surprise because they have been doing a lot of stuff and we have some uh direct exposure to that. So um don't cue any music because we don't have any mid-roll music, but I will pass it over to Doug. Talk about the federal shutdown.

SPEAKER_00: 3:14

Well, the federal government is shut down, um, which is a question mark because nobody knows exactly how long it's going to last. Um I believe the last one is about 34 days, but on average, uh, when this has happened historically, we're looking at one to two weeks. Um, but uh if we've noticed anything out of our uh current administration, is we don't always know what's gonna happen. It doesn't always follow uh precedent. Um, so in looking at this, you know, what we're tracking uh is the federal subsidies go out to states to fund childcare programs. So our childcare and development block grants, CCDBG, talking about FUN acronyms, um, and which is the main federal childcare funding source. Um, this is what's funding Head Start programs, uh childcare subsidies. Um, so we need to look at like, hey, when does this start to become a concern? Um, and so, you know, before we like, you know, get into that, like what is CCDBG? We talked about Head Start programs, childcare subsidies, right? This has been around for 30 years. It's designed to help uh low-income working families afford childcare. Uh, the federal government gives these block grants to the states. The states then use it to run their subsidy programs uh out to their um uh residence. Uh and the average family is gonna save thousands per year uh we do this. Um the what we're looking at now is most states have they kind of ballpark a reserve to run these programs for about a month. So we're looking right about that 30-day mark where we start to get question marks. Now, in the last shutdown, there wasn't ton of impact again, looking at 34 days. Again, if this extends out, there's also a question of what does the government deem as essential services? Um, given some posturing, we look back to um the omnibus bill from the summer uh when community development block grants were kind of on the chopping block. Uh, we don't know how this is going to be approached. There's been a lot of pushback to the state level. Um, and so we want to track this closely. Again, ideally, things start functioning again here shortly, but ultimately, if it does drag on long enough, this could be impacted. And so, what happens when subsidy programs, you know, go away? Funds flow directly to providers, the vast majority of these programs. Uh, employees, uh, families may not even be aware, right, that this is going to be impacted. It can impact supply, um, obviously the cash flow for the provider. It could impact their ability or even willingness to provide care to people with subsidies. And so that's again, losing care in an environment where we don't have enough providers to begin with for those that need it most. Um, in that, and that's people now not showing up to work, having to rely on licensed care, um, really just detrimental things all around. So something we're monitoring closely, uh, we'll continue to, and hopefully we don't see an impact here, but something we need to be cognizant of. And I think, you know, all of uh those that do listen to us talk about these things um likely have employees or those in their lives that could be affected by something like this.

SPEAKER_01: 6:36

That feeds into the child care modernization act, which I don't know if it was planned. My my stance has been not stance, it's it's it hasn't been like no what I was getting at is things uh things get released like it's well thought through in many cases. Like there was a reason why they introduced the Childcare Modernization Act on September 17th, right? Like it there's underlying power dynamics that we have no clue are happening, but um the Childcare Modernization Act, Senate Bill 2828 introduced September 17th, um there's bipartisan support for this, but um a couple things. The average cost of care, like this, a couple things as a background. We've talked about this before, but the average cost of care across the U.S. 13,128 per year. Um and when we look at child care across the aisles, 91% of Republicans, 91% of independents, 97% of Democrats think childcare affordability is a crisis. Um, and also while we don't think it's unusual, we're seeing more business groups actually backing uh this. Prior to, you know, I think in the past, they weren't as keen on it. But I think with the awareness over the last five years, all the associations, all the groups, all the messaging about how lack of childcare um is a business problem, we're now seeing a lot more business groups backing. So, what does the bill actually do? There's three big things fix provider payment rates, increase supply, and support different care options. So, for the provider rates, some things um that are challenging today are states pay providers too little for subsidized kids. Um, in fact, in many situations, providers actually lose money on a subsidized childcare, which means many don't do it or don't accept it. And on top of that, even when they are paid, I mean, we've we've seen this across every state. The time it takes for a provider to get paid on a subsidized kid could be month, two months, multiple months. Um, and like imagine just all the back and forth that sometimes has to happen if you don't submit certain reimbursements, if you don't do things exactly. I'm running through this. I don't know what happened with the FSA dependent care accounts and FSAs this year, but they have gotten a lot more strict on every little thing. There used to be for years, I've been submitting this one receipt that I get from Sloane's preschool.

unknown: 9:34

Yeah.

SPEAKER_01: 9:35

That always got approved. It didn't get approved this time because of there was like four things that it was just not the right thing. I mean, and it's like back and forth. So, like, luckily, I have um a little bit of OCD or maybe uh ADHD about this where I'm gonna like if I'm entitled to this, I'm gonna get it. And you want me to put it in a format? I will put it in a format and I will spend as much time as I need. But it's exhausting. I mean, imagine there's so many people where this they would just stop after one. Um, so solution here on fixing provider payments is require states to calculate actual cost of quality care. So, and the idea there, better rates equals more providers willing to take more subsidies and more options for your employees. Um, the bill also helps on the increased supply. So, new grant program to help providers expand or open new location. This is gonna help with the child care deserts, especially in rural areas. And so, again, more supply equals employees can actually find care. And then lastly, support for different care options. So require states to fund multiple types: license centers, home-based, before-after school programs, faith-based programs, right? We look at an employee schedule, they are not nine to five evenings, weekends, nights. So this bill helps support the mixed delivery system that we think and have seen work. Lots of people backing it, a lot of business groups, the independent restaurant coalition, National Association of Women's Business Owners, uh, Epic, 30 plus more organizations have signed on as well. And obviously, from we look at the employer, child care is workforce infrastructure. It just is. Um, businesses losing talent because parents can't find care or they cost too much, and so it it's cheaper to stay home than to get into the workforce. Uh, so this bill helps with the entire ecosystem. We'll keep track on this. Um, some things I think we looked at in terms of like what's the catch. So the bill authorizes changes, but if y'all don't know, authorization is not the funding of it that has to go to Congress. And so it is one step, but then the appropriations have to happen. So, but first step in a decade from the research. Um, so this does matter again. Whether it was timed perfectly before not related, I don't know. But I think it is a good step forward, and um that's what we wanted to share for the Childcare Modernization Act. We will keep our eyes on it to see what happens. But one thing, moving into Colorado, how's Colorado doing? Why did they get ranked number one, Doug?

SPEAKER_00: 12:42

I think Colorado's pretty again, a state with a pretty robust like social safety net uh in general and social services. Um, but they've also consistently been on the cutting edge uh in attacking childcare issues, both from a supply and uh demand, like affordability uh standpoint. So we've seen obviously Epic be very active there, um, but a lot of like kind of creative things being tested out in Colorado. So not a huge surprise to see us uh see them ranked um high on this side. Yes, I agree with you. Yeah. So like what's included in that, like high minimum wage income, right? Tax credits, health insurance, but then child care subsidies that are relatively broad and rich, um, paid um leave uh as well as nutrition programs and really like everything that like helps family afford the basic um necessities. And I think like that's again, like way the way you know this rankings came out from the prenatal to three policy impact center, another fun acronym. Um and uh like that I think is they're looking at it holistically, like what type of support does a working parent with two young kids in Colorado get? And I think the number came out to about$56,000, right, in support um through those years, which is over two and a half times um kind of the bottom states. Um Georgia, North Carolina, that's here. Um, unfortunately. Call out it's for now the list goes. Yeah, for now, that can change. States are looking at different things. I know Georgia was knocking some stuff around uh that we were tracking before. Um so I don't know. Do you want to go a little bit into the specific policies, Greg?

SPEAKER_01: 14:43

Maybe not specific, but I was just thinking about our journey over the last four or five years, right? Where we started out as thinking like vision, visionary on how do you solve this problem? Like, how do you solve, sustainably solve childcare? And I would say four to five years ago, we were pretty much on the cutting edge of how you do it, which is bring employers, families, providers, governments, philanthropy, like bring everybody together in one place, and they can exchange information, exchange money, exchange activity. Like that is how you can solve this. And part of that felt like government felt out of reach years ago because it's it's tough to like get your name known, it's tough to know who to talk to. But reflecting over the last maybe six months and where we're sitting at the table now, and I think part of it is the states that we're talking to, right? Like they I think years ago, maybe I thought that they knew all the answers, but it's just not true. They are also looking to understand what the answers are. But we're at the table. Like that is a big journey that we have taken. And like Colorado, right? Like the company that we work at, when we work at Upwards, like we're talking, we're talking to not only the employer, but also the legislation that's happening in a certain area. But other people on our team are also talking to state representatives, right? And it's all flowing together. And at the end of the day, there isn't outside of upwards in our model, everybody's kind of trying to piecemeal it. I do see like some people also, I think, have the same idea that you have to get employers, providers, like everybody to work together. But there's been a tech, a technology gap that hasn't like came to fruition. So, like Epic, really, really great on advocacy research. They've done a bunch of like site buildings, but I don't believe they have the extent of the technology part of it that enables more of that stuff to happen, right? So Mike, just reflecting on government and and being part of the conversation years ago felt out of reach. We're there, we're getting there, and we're only going up higher, not only like federal government, but states and locals, right? Like we're becoming the part because I think people are seeing, yes, you have all the research, you have all the advocacy, you have the vision for how this, but you also have the tech part of it. Like that, like how do you deploy your ideas? We have both.

SPEAKER_00: 17:47

Yeah, it's the tech and it's the interoperability of it, right? Like these pieces have to work together. And I think when there has been a shift in the conversation, this episode is sponsored by Diet Coke. Sorry, Doug. I had forgotten. Give a shout out. Absolutely. Um, that's how we're funded at the end of the day. That that and our parents downloading the show. And um, but no, there's been a shift in the conversation. Like we've had more conversations recently that are much more holistic and have multiple stakeholders in that conversation. We're talking about a holistic solution across stakeholders versus piecemeal. And I think that's where like a lot of these programs and where you see this technology technology gap um is they are just focusing on one specific piece. And so you'll end up with a very, very small slice of something being implemented, and without the other pieces being involved, it doesn't work.

SPEAKER_01: 18:40

Yeah. Um well, even not only just other pieces, right? It's the like example on try tri share programs. Um have approached it more of we need to get the providers on first before they get the employers. Which could, you know, when you look at a marketplace, supply is king, so get your supply first and then get demand. The problem is that fails when people don't know how to get in front of employers. And that's what we've seen, right? And so when when you talk about how do you get in front of employers, I mean that classic like B2B marketing sales, right? That's being there on webinars, being there at conferences, having funnels, like all of all of that is missing on a lot of the tri-share programs. But then it also is reverse. Some are going after employers, but you don't have the provider network. Same thing, marketing problem, sales problem. And so, like, not only do we, I think from a tech perspective, we have the interoperability, the tech, but it's also those like learnings of here's how you scrape an entire list of a state's employers. Here's how you enrich that list, here's how you understand who the HR leaders are, here's how you message to them. Like all of that, not many like it's tough. That part is tough too.

SPEAKER_00: 20:07

Yeah, at scale, and I think also that you you hit on it, the messaging, because you're trying to get, like in the example of a tri-share, you're trying to get an employer to contribute significantly more than they do today, which is nothing. And like we look at where this tends to happen and HR and the benefits and the amount of budget that healthcare spend takes up. It's a challenge, right? Like we've seen it to really build that case. And so, like having done that, right, and having gone through that experience and like the data to back, it's really important because it's not just logical. Of course, we want to do this. There are some organizations that will, and that's great, but not the majority of. And I think that's again where we see those struggles on that side.

SPEAKER_01: 20:53

Well, this has been a great episode, three good topics coming off of our last week episode. One episode per month thus far, but two in the last ten days. So with that said, cue the music. And we out. I'm here. Have a good day.