Financing Strategically

Technical Assistance in Systems Building for State Leaders

Technical assistance to support systems building, including strategic planning, is available through the Child Care State Capacity Building Center and may be available through other federal technical assistance centers. Please check with your State Systems Specialist for more information.

Financing an early childhood system is an essential part of systems building. Providing a state and its partners with approaches for a sound and solvent finance strategy is critical. This guide provides an overview of key concepts linking state financing options and systems building. The focus is on defining key state-based financing strategies, providing an overview of practical financial management practices, and reviewing financing forecasting tools.

Finance refers to generating, receiving, and allocating funds and conducting analysis designed to build capacity and sustain a system. It is important to consider funding an early childhood education system in new and creative ways. Financing strategically is an approach for states to better use existing and new or ongoing resources, maximizing public revenue and allocating that revenue in new ways. It may mean generating new state revenue, creating or enhancing public-private partnerships, and expanding private sector contributions to the system. Financial management and forecasting are essential practices that help states create and sustain a system. Financing strategically builds a more collaborative system and stronger partnerships.

In today’s world, a well-planned financial effort is necessary to support a vision, standards, and outcomes in an early childhood system. Doing so helps offer more equitable opportunities to all children and families. A well-planned effort also supports a well-compensated, qualified workforce. The complexity of funding and the lack of coordination across the early learning system may make it difficult to show improved outcomes for young children and ensure that they are ready to succeed in school. Public funds are also limited to target populations and may only be used for narrowly defined, specialized activities according to the funding source requirements. Private and philanthropic initiatives designed to improve quality and accessibility of services are also narrowly targeted, short-term, and often uncoordinated. The result is often a lack of funding for services and supports as well as disjointed funding, which all lead to a fragmented early childhood system.

Financing an early childhood system is complex under ordinary circumstances. Each entity within the system has unique funding sources and mandates, which often specify services provided. Identifying, coordinating, managing, and funding sources is crucial to meeting expected outcomes. However, the global coronavirus disease 2019 (COVID-19) pandemic caused dramatic changes for early childhood programs already operating on thin margins. Child care programs experienced financial upheaval due to many factors, such as pandemic-related public health and safety regulations, fluctuating and unpredictable demand for child care, and mandated closures in some states. As policymakers consider this fiscal crisis, changing needs, and the future of child care programs, they need to ensure their decisions reflect the unique financial factors and structures required to promote short- and long-term sustainability.