Allister Chang and Raul Echevarria: The economics underneath DC’s childcare system are breaking down

This month, the DC Council voted to reverse most of the mayor’s proposed cuts to early childhood programs, adding roughly $60 million to the Early Childhood Educator Pay Equity Fund and nearly $50 million to the childcare subsidy program across the next two fiscal years. To get there, the council — among other things — tapped $150 million in reserves over the objections of the city’s own chief financial officer. Families and providers across the District are relieved, and they should be.

But this is the second year in a row that the council has had to rescue childcare funding from proposed cuts, and the rescue keeps getting more expensive. The Pay Equity Fund has nearly doubled in cost in two years, by the administration’s own accounting. The subsidy program now requires roughly $150 million annually to meet demand. Unless something fundamentally changes, next spring will bring the same fight with a larger price tag, and the spring after that a larger one still, because the District is paying more every year to stabilize a system whose underlying economics keep deteriorating.

The city is increasingly being asked to compensate for an economic model that no longer works on its own terms — but that model is something the DC government actually has the power to repair.

For years, many of DC’s childcare providers survived through a delicate balancing act.

Infant and toddler care often loses money on its own. Babies require lower staffing ratios, more labor-intensive care, and more expensive classrooms than do older children. The tuition families can realistically pay rarely covers the true cost of providing high-quality infant care. 

What traditionally made the broader economics work was the mix. Older preschool classrooms helped subsidize care for younger children. One preschooler and one infant together could roughly make the math work. Public pre-K funding helped stabilize the broader mixed-age model.

That balancing act increasingly feels like a house of cards.

Over time, DC policymakers kept adding new cards to the top of the structure, making it all the more precarious. Expanded public pre-K access. Lower staffing ratios. Higher workforce credentialing requirements. Wage supports. Additional compliance expectations. 

Most of those policies make sense individually: Of course families benefit from expanded public pre-K access. Of course lower staffing ratios can improve classroom quality. Of course teachers deserve higher wages and stronger professional support.

But childcare is an interconnected economic system, and DC leaders increasingly debate each policy lever independently without fully grappling with how they interact once they collide inside an actual operating business.

Each facility still has to make payroll. That underlying tension now defines DC’s childcare crisis.

Parents are paying staggering tuition. Teachers still struggle financially. Providers operate on margins so thin that even short reimbursement delays can become an existential threat. Infant and toddler slots are repeatedly scaled back despite years of public investment and political attention.

From our vantage points as policymakers and providers working directly inside the system, we have both come to recognize that the foundation underneath the current model is becoming dangerously unstable.

That is especially true in infant and toddler care, where the economics are extraordinarily difficult almost everywhere in the country. The Bipartisan Policy Center estimates that personnel costs consume roughly 70% to 80% of provider operating expenses, while many providers operate on margins below 1%.

DC’s own cost modeling reaches similar conclusions. The Office of the State Superintendent of Education estimated annual infant care costs at roughly $31,826 in childcare centers and as much as $26,672 in small home-based settings.

What makes the current moment especially concerning is that other cities are already showing what can happen when policymakers fail to account for how interconnected these systems are.

A study examining New York City’s 2014 universal pre-K expansion found that private childcare centers lost approximately 2,700 infant and toddler seats after 4-year-olds transitioned into public pre-K programs. Using a dataset covering all licensed childcare facilities in New York City, the study concluded that the reduction in infant and toddler capacity was concentrated in high-poverty communities and reflected the loss of older preschool classrooms that had historically helped subsidize younger children.

The issue was not simply enrollment loss. Providers had lost the part of the business model that historically helped subsidize infant care.

California is now grappling with similar dynamics. A recent Learning Policy Institute review of the state’s universal preschool rollout warned that expanding transitional kindergarten without intentionally stabilizing community-based providers can disrupt the broader childcare ecosystem. The report emphasizes that mixed-delivery systems — meaning systems that combine public schools, nonprofit providers, private childcare centers, and family childcare homes — are critical for maintaining infant and toddler capacity, neighborhood-level access, and parent choice.

The report points to success stories like San Francisco, where policymakers anticipated this problem and deliberately expanded infant and toddler capacity as public preschool expanded.

Those examples matter because they show that the challenge is not whether officials care about childcare. The challenge is whether they understand how fragile the underlying economics already are before layering additional changes onto the system.

Right now, every part of DC’s childcare system is pressuring every other part simultaneously. Providers are expected to absorb rising labor costs, maintain lower staffing ratios, navigate reimbursement delays, sustain quality standards, and keep tuition affordable for families — all at the same time.

Parents think providers are charging too much. Providers struggle to meet payroll when reimbursements from the city are delayed. Staff can often make more in other sectors. Meanwhile, the government keeps layering new expectations onto an industry already operating near zero margins.

Then everyone acts surprised when classrooms close or providers stop expanding.

Unlike DC public schools and charter systems that operate with forward-funded public budgets, many community-based providers function on reimbursement timelines that can lag weeks or even longer. At CommuniKids, teachers and staff were paid months ago for services already delivered, yet reimbursement tied to those costs is still outstanding.

Many of the individual policies layered into DC’s childcare system were implemented for understandable reasons. But the system has increasingly been built one lever at a time without enough attention to how those levers interact financially over the long term.

A lower staffing ratio paired with sustained public investment may be workable. Requiring lower ratios without ensuring stable long-term funding creates different pressures. Expanded pre-K without intentional stabilization for community providers creates another set of pressures. Delayed reimbursements compound the dire situation further.

Every new policy choice affects the sustainability of everything already sitting underneath it.

That is the real danger of building a house of cards. The problem is not any one card. The problem is continuing to add weight to a structure whose foundation is already unstable.

Whatever direction the next mayoral administration takes on childcare, the central question should not be whether a proposal sounds good in isolation. The question should be whether policymakers understand how every new mandate, reimbursement structure, staffing rule, subsidy expansion or operational requirement interacts with the broader ecosystem within which providers are trying to survive.

Right now, DC sometimes treats community childcare providers as essential infrastructure, and sometimes like a financially disposable add-on. The longer that contradiction goes unresolved, the harder it will become to stabilize the childcare system families depend on.

Allister Chang is the Ward 2 representative on the DC State Board of Education. Raul Echevarria is the co-founder of CommuniKids Preschool, a multilingual early childhood education provider serving families across the Washington region.

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