The high costs of underinvestment in early childhood care and education

Yahoo

25-03-2025

"As New Hampshire families, businesses, and the state economy all have vested interests in the economic impacts of ECE, funding could be shared across these beneficiaries." (Getty Images)
New Hampshire faces a significant child care shortage, with economic impacts extending beyond families with young children. According to a recent New Hampshire Fiscal Policy Institute analysis that I conducted, each of the approximately 9,000 unavailable Granite State child care slots in 2023 may have cost the state's economy between $22,416 and $35,004 in lost earnings to families, and reduced revenues among New Hampshire's state and local governments as well as businesses.
Families may have lost as much as $177.9 million in wages in 2023 due to inadequate child care availability. While lost wages directly affect family budgets, they also impact local communities that would otherwise benefit from income spent at area businesses. New Hampshire businesses may have collectively lost as much as $55.5 million in 2023 due to reduced productivity and impacts from benefits paid when employees were not working. Business losses also include potential costs associated with recruiting, hiring, and training replacements when employees resign due to inadequate child care.
Tax revenues are adversely affected when families and businesses experience financial losses. Residents pay taxes related to property, travel, leisure, dining out, and certain other sales. Granite Staters have an average tax rate of about 6.6% while effective business tax rates are approximately 4.4%. Using these estimates, New Hampshire's state and local governments may have lost the equivalent of approximately $1,300 to $2,000 per unavailable child care slot.
The governor's state fiscal years 2026-2027 budget proposal allocates about $84.9 million across both years to New Hampshire's Bureau of Child Development and Head Start Collaboration. This bureau administers the main funding mechanism for the New Hampshire Child Care Scholarship Program (NHCCSP), a state-federal partnership that provides child care assistance to families with low and moderate incomes. This allocation makes up about half of one percent of the governor's proposed $16.01 billion state budget.
Addressing the ECE shortage is challenging due to limited resources. Private tuition is the primary way ECE providers raise revenue; however, they are limited in how much they can increase tuition rates before families can no longer afford child care. Many providers operate on thin, if any, profit margins, so there are few funds to reinvest into their businesses. Public support can help providers keep spots available for children and make investments for future expansions. State general funds could provide flexible support as these funds can be spent in any way the Legislature deems appropriate. The state distributed $15 million in General Funds to ECE providers under the current state budget to support the recruitment and retention of child care educators. This funding is not repeated in the governor's budget proposal.
In 2024, New Hampshire passed legislation to allocate $2 million for a six-month program that provides child care assistance to certain ECE professionals who work at least 25 hours per week in licensed child care facilities. To be eligible, these professionals must work in facilities that accept NHCCSP and live in households that earn no more than 100 percent of the state median income, or $133,449 for a family of four. Thoughtful data collection can help determine the effectiveness of these programs for future consideration.
Business partnerships may be an alternative to increased tuition costs for families. Child care development grant programs may be an opportunity for businesses to continually invest in a funding pool accessible to providers. Funds could be used for various expenses, including increasing teacher wages, hiring additional educators, and building or purchasing larger spaces to expand capacity.
Federal funding is another source of ECE support but comes with specific rules regulating how the funding can be spent. To access certain federal resources for ECE, New Hampshire must provide 50:50 fund matching based on the Federal Medicaid Assistance Percentage (FMAP). At least 70% of funding must be utilized for NHCCSP. The remaining funding must be divided between support to help ensure New Hampshire children have high-quality ECE, administrative expenses, and other nondirect services including IT systems costs.
As New Hampshire families, businesses, and the state economy all have vested interests in the economic impacts of ECE, funding could be shared across these beneficiaries. While more public funding would likely be required, investments to address the ECE shortage have positive returns for all Granite Staters. There is no one-size-fits-all solution, even among New Hampshire counties and municipalities, and thus, multifaceted approaches will need to be implemented while ensuring safe, enriching environments for the Granite State's youngest residents.