Massachusetts Senate Sets New Guardrails Against Child Care Profiteering: What You Need to Know
By Elliot Haspel
Last week, the Massachusetts Senate made significant strides in prioritizing the betterment of children and families by passing a major child care bill, S.2697. If enacted into law, this legislation would be another step in reshaping the state's child care landscape, setting a course for others to learn from. The bill also includes arguably the strongest guardrails against undue profit-seeking behavior by large corporate for-profit chains ever seen in the United States. This legislative language may prove to be an important precedent, since states around the nation are beginning to wrestle with the role of these chains (many of which are owned by private equity firms) as more public child care funding becomes available.
Let's delve into the key aspects of this bill and what it means for child care providers, families, and for-profit chains alike.
Commonwealth Cares for Children (C3): A Lifeline for Child Care Providers
At the heart of S.2697 lies the Commonwealth Cares for Children (C3) program, which seeks to provide operational grants to child care providers. These grants, currently totaling $475 million annually, aim to support center-based and family child care programs, ensuring that they can continue to deliver quality care to children across Massachusetts. For instance, center-based programs receive a monthly grant averaging, as of 2022, around $12,000 (or nearly $150,000 a year). The program was started during the pandemic and S.2697 would make it permanent.
In addition, under this bill, more families would be eligible for subsidized care, reflecting a commitment to equitable access to child care services.
Guardrails Against Profit-Seeking Behavior
One of the most striking features of S.2697 is its robust measures to curb profit-seeking behavior by large corporate for-profit chains. These measures set a precedent for addressing the role of such entities in the child care landscape, particularly as public funding becomes more available.
The legislation imposes strict conditions on for-profit chains seeking C3 grants. For-profit child care companies with more than 10 sites in Massachusetts (i.e., large for-profit chains) must agree to the following conditions to receive C3 grants:
Accepting Children in Need: For-profit chains must agree to enroll a reasonable number of children from low-to-moderate-income families who receive public subsidies
Investing in Educator Compensation: A portion of the grant must be allocated to compensating educators, following a defined career ladder and minimum salary levels that would be established by the state.
Financial Transparency: Chains must provide detailed financial information on how they use grants and other relevant data as requested.
Three other policies shape the guardrails. First, the bill prioritizes allocating grants to programs serving high numbers of lower-income children or those from high-needs populations. While this does not speak directly to for-profit chains, research suggests that the chains tend to target a more affluent clientele; therefore, many will not be front of line for the grants. Second, there is a 1% upper limit to how much C3 funding any given chain can capture. If C3 funding stays at the $475 million figure, for example, one chain can receive no more than $4.75 million yearly, absent a waiver from the state. Third, the presence of “enforceable compliance standards” and reviewable grant renewals means these regulations have teeth.
Looking Ahead
Massachusetts is poised to become a crucial case study in implementing guardrails to ensure that public funding supports high-quality, equitable child care services. The state follows Vermont as only the second to codify any such guardrails*.
While the fate of S.2697 rests with the Massachusetts House, its passage by the Senate sets a clear roadmap for other states and potentially the federal government. By prioritizing the well-being of children and families over profit, Massachusetts is one of the states leading the charge in shaping the future of American child care.
Guardrail Legislative Text
S.2697 lays out the parameters for C3 as a permanent program. It is important to note that when the legislation refers to “a provider that is not an ‘eligible organization’ as defined in section 18 of chapter 15D,” this essentially means a for-profit organization; non-profit providers are automatically eligible under that definition.
The department shall maintain a formula for distributing operational grants to early education and care providers, which shall give preference to providers that serve: (i) high numbers of children receiving child care financial assistance; (ii) high numbers of high needs children; and (iii) unique populations or that otherwise advance the interest of the program as determined by the department … [Language regarding what the formula shall take into account omitted for readability**] … A provider that is not an “eligible organization” as defined in section 18 of chapter 15D and that, directly or through an affiliate, operates more than 10 center-based programs in the commonwealth shall not receive more than 1 per cent of annual program funds unless the provider is granted a waiver by the commissioner deeming such allocation of more than 1 per cent to be in the best interest of the commonwealth. The department shall incorporate geographic equity into the development of the distribution formula.
Annually, the department shall review and update the operational grant formula to ensure equity and effectiveness in the financial sustainability of early education and care providers. Prior to the establishment or a revision of the operation grant formula, the department shall conduct a public hearing under chapter 30A and submit the proposed updates to the board for its approval.
As a condition for receiving operational grants under this section, the department shall require early education and care providers to: (i) enter into and comply with contractual agreements with the department or its agents, which shall be developed by the department; (ii) continue to, or demonstrate a willingness to, enroll children receiving child care financial assistance, if a family receiving child care financial assistance chooses the provider and the provider has an available opening; (iii) comply with the career ladder established in section 20, and if not feasible, provide increased salaries, compensation and benefits to the extent possible; and (iv) provide the department with data that the department requires, as needed to carry out the department’s assessment and reporting requirements under this section. The department shall solicit public comments prior to establishing or revising criteria for eligible recipients of the operational grant program.
Operational grants shall, subject to appropriation and the distribution formula developed under subsection (c), be renewed for each provider; provided, however, that renewal shall not be required if there is a change in circumstances for the provider making them ineligible, the provider is not in compliance with this section or if the department, in its discretion, determines that renewal would not be appropriate.
The department shall establish enforceable compliance standards to ensure the integrity of the program. The standards shall ensure that open slots in early education and care providers that receive operational grants are accessible to children receiving child care financial assistance and that recipients are making meaningful progress towards complying with the career ladder standards established in section 20; provided however, that a provider that is not an “eligible organization” as defined in section 18 of chapter 15D and that, directly or through an affiliate, operates more than 10 center-based programs in the commonwealth and receives operational grants shall: (i) demonstrate a willingness to accept more children receiving child care financial assistance in proportion to the provider’s size, as determined by the department; (ii) dedicate a certain percentage of the provider’s operational grant funds, as determined by the department, to increasing compensation for their early education educators in alignment with the department's career ladder; and (iii) annually provide the department with an audited financial statement detailing how the provider’s operational grant funds are spent. Prior to establishing or revising standards, the department shall solicit public input.
*It should be noted that unlike Vermont—the other state that has considered investor-backed chains in its legislation—S.2697 bill does not cap parent fee increases, although the design and implementation of those caps in Vermont has been controversial.
**Omitted language: “The formula shall consider: (i) licensed capacity and enrollment including the ages of the children enrolled and the ages of the children for whom the provider has capacity; provided, however, that enrollment shall be measured by the department using quarterly enrollment averages or if deemed appropriate by the department, enrollment averages less frequent than quarterly (ii) costs associated with employee compensation, including salaries and benefits; (iii) the number of enrolled children receiving child care financial assistance; (iv) the demographics and income of families served, including the number of children enrolled and identified as high needs; (v) the cost of goods and services necessary for provider operations, including rent, utilities, maintenance and facility improvements; (vi) the cost of quality care methodology developed by the department and, until such time as the methodology is established, any available information regarding the cost of quality early education and care, including available credentialing frameworks and applicable salary guidelines; (vii) increasing the financial stability of providers in need; (viii) and business structure of providers; and (ix) any other factors impacting the cost of providing quality early education and care including, but not limited to, serving infants and toddlers, providing nonstandard hours of care and providing care in socially and economically disadvantaged and historically underrepresented communities with shortages of early education and care slots.”