Despite having some of the most resources and economic support, a recent national study ranked Indiana’s early education system 42nd in the country — and second-to-last when it came to accessibility.
The WalletHub story, shared earlier this week, is simply the latest confirmation for Hoosier parents that Indiana’s child care market is struggling. Experts, business leaders and politicians agree that Indiana needs more child care, but can’t seem to agree on the best way to meet the moment.
Report: state loses out on $4.2B annually due to child care shortage
Facing budgetary pressures and depressed revenue forecasts, state leaders opted to trim funding and narrow eligibility for early learning and child care resources earlier this year. Seats for state-funded preschool, known as On My Way Pre-K, have been halved while vouchers for subsidized child care have more 21,000 children on a waitlist.
One federal program, Head Start Indiana, hopes to help close the gap left by vanishing state funding, but faces its own challenges with flat federal funding.
“We are the quietest, most successful 60-year old program in the federal government’s history,” boasted Rhett Cecil, the organization’s executive director. “… (our programs) are going to support their families and children. They’re allowing families to work or get job training or further education. And our services — that child care and early education — are free for those families.”
Just under 13,000 families in all 92 counties utilize the program, which receives roughly $181 million in federal funding annually. That budget line was briefly threatened by the Trump administration, which walked back proposed cuts in favor of flat funding — which does mean services will be lost as inflation and other costs eat into the bottom line.
The second-term president also eliminated the federal Head Start office covering Indiana back in April — though the federal Administration for Children and Families announced it would dedicate one-time funding to Head Start locations earlier this week explicitly for nutrition, but not for other programming costs.
Additional federal support could allow it to expand to meet the need following state cuts, leaders hope, and continue employing almost 4,000 Hoosiers.
“Let’s say, hypothetically, we get $100 million more dollars. How many more teachers and classrooms could be opened?” Cecil mused. “How many kids could we serve off that waitlist?”
Importance of child care
Participating in and access to child care resources reaps benefits for young Hoosiers, such as better school readiness skills. Some national research has found that early education may also decrease future crime and could generate $7.30 for every one dollar invested.
In Indiana, the shortage of child care options costs the state an estimated $4.2 billion annually, over a quarter of which is linked to annual tax revenue lost.
The 2024 study from the Indiana Chamber of Commerce emphasized the need to free up parents, mostly women, who’ve left the workforce “as a direct result of childcare-related issues.”
“There’s some data out there that one in four Hoosier parents leave their job over child care gaps, and it really impacts talent and workforce,” said David Ober, the chamber’s vice president of taxation and public finance. “It’s hindering economic momentum in the state and so it is a huge deal for us.”
For the last few years, tackling the state’s child care crisis has been a top legislative priority for the organization, which represents the interests of thousands of Hoosier employers. Ober said the chamber is working to plan a child care summit later this year to identify potential solutions.
According to Brighter Futures Indiana, average full-time weekly care costs families $181 per week — with even higher prices for infants and toddlers. That doesn’t factor in type of care or quality, and prices vary by community.
Families can spend more on their young children’s care than on a college education — if it’s even available in their communities. Rather than pay the price, many Hoosier parents simply drop out of the workforce at the same time that employers are scrambling to hire talent.
Ober highlighted recent legislative efforts to expand child care, including one that expanded a tax credit for employers directly providing their employees with child care resources. Other bills have tweaked staffing ratios and created a pilot program for so-called microcenters.
But workforce remains a challenge, even for Head Start centers, earning its own legislative study carveout. Over 20% of Indiana’s child care workers left the field during the pandemic — a shock that “has not really fully healed,” Ober said.
“If you ask any provider in the state, workforce is the hardest problem,” Ober said. “… How do you get educators and keep them? There’s so much more work to be done there and it’s challenging.”
Traditional market forces struggle to balance affordability for parents against costs for child care, a gap sometimes covered by government subsidies.
But Ober insisted that “child care is infrastructure,” especially for the businesses reliant upon employees who are parents. Changing funding is “going to just exacerbate underlying problems,” he added.
“Those numbers are pretty stark,” Ober said. “And then when you add in changes at the state and the federal level, it creates new problems that we all have to come together and work on,” he concluded.
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.
