Overview
To foster an equitable recovery, communities need inclusive policies at both the local and federal levels, and the historic investments and substantial flexibility afforded to local governments by the CARES Act and the American Rescue Plan Act (ARPA) offer a potentially once-in-a-generation opportunity to transform local business and workforce ecosystems in equitable directions.98 As programs supported by these investments are implemented, it is important to address longstanding obstacles within federal policies and programs to ensure local governments and their community-based partners can use them inclusively and effectively, and that community-based partners are integrated within programs to offer alternative financing and technical assistance that is affordable, culturally relevant, and linguistically accessible. The recent enactment of the SBA Community Navigator Pilot Program is an ideal example of how the federal government can do just this, by supporting local organizations that can bridge gaps and better connect underserved communities and entrepreneurs to capital, business counseling, and technical assistance. The provision of flexible federal funding is critical, especially for smaller localities, which are often challenged to apply for funds even from programs that are meant to be flexible, such as the Community Development Block Grant (CDBG) program. Streamlining federal policies, like those that guide CDBG and Economic Development Administration (EDA) investments, would provide localities with the necessary flexibility to foster broader access to resources and build on the strengths of smaller, community-based organizations. Finally, federal interventions in the wake of COVID-19 have focused on short-term funding to help businesses retain a baseline level of employees and operational activity. To better position Main Streets and business districts for long-term recovery and growth, and to accelerate the deployment of funds to local businesses, future federal investments should leverage the expertise of national nonprofit partners with deep connections and experience in expanding the capacity of local business development organizations (BDOs).
Use CDBG to promote more equitable small business and workforce development ecosystems
The Community Development Block Grant (CDBG) program of the U.S. Department of Housing and Urban Development (HUD) is an effective tool for directing federal resources into low- and moderate-income (LMI) areas. Local agencies can use CDBG funds at their discretion, provided they meet broad regulatory requirements to benefit LMI persons, address blight, and meet other urgent needs. CDBG provides grantees with the ability to use funds to meet the needs of small businesses owned by LMI individuals and in LMI communities and populations seeking employment. That is one of the reasons why Congress allocated an additional $5 billion in CDBG funds as a response to COVID-19. These additional resources provide localities with an opportunity to innovate and adopt equitable practices as they determine the best use of their traditional and coronavirus-related allocations.
Practitioners cited using CDBG funds for a wide range of programs and projects that support small and mid-sized businesses (SMBs):
- In Atlanta, Invest Atlanta, the city’s economic development authority, through its small business loan program, used $200,000 in CDBG funding to offer SMBs loans at 2% interest for storefront improvements, as part of a larger mixed-use development project. To leverage CDBG funding, Invest Atlanta stacks CDBG funding with other federal funds (such as SBA and EDA) and private financing to cover acquisition, renovation, and assistance to SMBs; it combines these activities with workforce programming to assist people looking for employment and provide financial assistance to companies that might employ them.
- In Los Angeles, the city uses CDBG funding to support Business Source Centers, which offer multilingual, hands-on, affordable business assistance services, direct financial assistance, and entrepreneurial training.
- In Boston, the city used CDBG funds to establish the Small Business Relief Fund, which provided grants of up to $10,000 to small businesses impacted by the COVID-19 pandemic. Grants could be used to address a wide range of needs, such as rent, fixed debts, payroll, accounts payable, lost sales, lost opportunities, and other working capital expenses.
- In San Diego, the city has historically used CBDG funds to support the training, licensure, and business development of home-based child care providers through partnerships with community-based organizations.
While practitioners laud the flexibility of CDBG funds, they raise three challenges: (1) the parameters and requirements are challenging and time consuming to navigate; (2) they require significant reporting and documentation; and (3) the funds may not cover the full costs of the program. Practitioners noted that jurisdictions do not take advantage of CDBG’s flexibility to the extent possible and are often hesitant to innovate due to uncertainty and an overreliance on continued investment in past programs, even those that have not delivered results. They emphasized the importance of considering the following:
- What kinds of small business or workforce development programs, e.g. job training, financing, technical assistance, could CDBG fund, bearing in mind the target audience’s needs and the will and support of local government officials?
- Who will implement the program? This may be the local jurisdiction staff, subrecipient nonprofit or for-profit organizations/agencies, community-based development organizations (nonprofits that meet specific criteria set forth by HUD), contractors, and CDFIs.
- What reporting and records must be kept for the program?
- Is the required staffing experience and administrative infrastructure/support (e.g., legal, financial) in place? Can subrecipients or contractors fill any gaps in administrative capacity?
- What other funding sources could be used to cover any funding gaps?
Practitioners recommended being aware of relevant regulatory requirements and restrictions, tailoring the use of CDBG funds to work within them, and stacking CDBG funds with other, less restrictive funds, such as general funds, to resource the remainder of the desired program. To alleviate the reporting burden, they recommended jurisdictions be selective in defining their federal program objectives so that they capture the activities and outcomes that matter to them, and when possible, avoid metrics that are overly burdensome to track and report.
Support child care businesses as a catalytic and equitable recovery strategy
Child care plays a vital role in local economic development and equitable recovery. Working parents with young children need access to quality, affordable child care to obtain and retain jobs. At the same time, child care providers provide a safe, nurturing, educational environment to help prepare tomorrow's workforce. They provide essential services to local communities.
Child care is also an important industry. In the U.S., the child care services sector encompasses about 54,000 commercial facilities with combined annual revenue of $27 billion, plus about 21,000 facilities run by nonprofit organizations with combined annual revenue of about $14 billion.99 As of 2019, the sector employed over 2 million workers, nearly all women (92%), with a disproportionate percentage being women of color and immigrants.100 Despite low earnings ($25,460 is the median annual wage),101 child care facilities provide accessible job opportunities for workers without a bachelor’s degree. The typical entry-level educational requirement in the child care industry is a high school diploma or equivalent and most workers receive short-term on-the-job training.102
Overwhelmingly, cohort participants highlighted that despite the unique position that child care enterprises occupy as both small business operators and essential social service providers, they are often overlooked in economic development efforts. Historically, child care has not been prioritized as an essential industry that allows workers, in particular women, to join and remain in the labor force.
Cohort participants emphasized that access to adequate targeted funding, coupled with technical assistance, could be catalytic to these small businesses and their workforce. In the words of one practitioner:
As we came out of COVID, one industry folks realized the importance of was daycare service providers. They are often overlooked, especially those that are providing daycare opportunities from home and not in a brick-and-mortar. They're such an essential service. And there's a lot more of them in the community than we [lenders and technical assistance providers] ever see and realize, and they don't get access to a lot of the resources, or they don't know that those resources are for them. But they're also a great example of a business category that with some technical assistance, and with some hand holding from a business modeling standpoint, can easily grow into a brick-and-mortar and with that provide more job opportunities. Because there's always a need for child care.
This moment presents an opportunity for local governments to better support the child care industry and reap both economic and social dividends from their investments. In many communities, the Small Business Administration’s resource partners, which include Small Business Development Centers (SBDCs) and Women’s Business Development Centers (WBDCs), already provide technical assistance to a wide range of enterprises. Yet too often, child care expertise and business counseling are lacking at these institutions due to budget and capacity constraints, or they lack the cultural and linguistic competencies necessary to connect with diverse populations. Localities can better support the integration of child care into SBDC and WBDC programs by funding dedicated services for child care entrepreneurs either based at the resource centers themselves or at community-based organizations. The City of San Diego utilized Community Development Block Grant (CDBG) investments to support programmatic partnerships between the San Diego and Imperial Network SBDC and the International Rescue Committee to better meet the needs of family child care businesses, particularly within immigrant and refugee communities. In other instances, resource centers have also played a critical role during the pandemic by connecting providers to child care relief funds.
Another relevant effort includes the Philadelphia Emergency Fund for Stabilization of Early Education (PEFSEE), administered by The Reinvestment Fund, a CDFI. Created to support Philadelphia’s early learning sector during the COVID-19 crisis, PEFSEE provided $6.7 million in grant funds to minimize the loss of revenue due to the pandemic while providing technical assistance through its Coaching to Success Program. PEFSEE was capitalized with support from individuals and private philanthropy, namely the William Penn Foundation and Vanguard’s Strong Start for Kids program.
Child care relief dollars and stabilization grants were crucial and will continue to make a difference, but an intentional, equitable recovery will require a shift in how governments view and value care work. Now, with approximately $50 billion in child care relief currently available to states, territories, and tribal agencies,103 they and their local partners have unprecedented resources and opportunities available to invest in the supply and quality of local child care not only as a way to support vital infrastructure for workers and families, but also as an equitable economic development strategy. For example, by partnering with community-based organizations and local technical assistance providers, lead agencies could maximize the chances that a considerable portion of these funds would reach BIPOC–owned child care businesses and contribute to the startup of new child care enterprises. In fact, approximately $2.3 billion ($11.9 million for tribes) may be used to fund organizations like CDFIs or business development organizations and ensure efforts such as The Reinvestment Fund’s PEFSEE are multiplied. As importantly, $15 billion of that funding is available to states, territories, and tribes for activities allowed under the Child Care and Development Fund (CCDF), including to increase provider payment rates and workforce compensation so that child care providers can retain a skilled workforce and deliver higher-quality care to children receiving subsidies, as well as to implement policies that make child care safer from COVID-19 and more affordable, and that build the supply of child care in low-income communities, especially for historically underserved populations.104
