$50M effort for high-quality early childhood facilities is a model for the equitable implementation of federal funds for children and families

The rooms are airy and bright. Multicolored carpeted areas are coordinated with walls painted in soothing shades. Cubbies and tot-proportioned features are everywhere. And the radiant smiles of the small children — and the parents who keep the academy at or near full capacity — are the ultimate affirmation that the 2020 makeover of LACC Childcare Academy on Detroit’s westside was a success.

The academy was among more than 80 centers in Detroit and elsewhere in the state that benefited from IFF’s Learning Spaces program. Initially funded by The Kresge Foundation, and then joined and expanded with the collaboration of the W.K. Kellogg Foundation, the PNC Bank Foundation, the M.M. Fisher Foundation and the Ralph C. Wilson Jr. Foundation, Learning Spaces offers early childhood education centers up to $75,000 to cover the cost of real estate consulting, minor repairs to their facility or other facility-related needs with the goal of expanding the much needed quality seats in the state.

The State of Michigan’s recent effort through the $50 million Caring for MI Future: Facilities Improvement Fund to similarly help renovate and expand high-quality early childhood seats across Michigan is yet another example of what government can do when it prioritizes the wellbeing of our youngest children and their families.

The $50 million to renovate and expand childcare facilities is part of the state’s overall Caring for MI Future initiative, a $100 million investment to help Michigan families find quality, affordable childcare in their community by investing in 1,000 new or expanded childcare programs by the end of 2024.

Michigan Governor Gretchen Whitmer and the Michigan Department of Education (MDE) showed true leadership in the belief in government expanding access to early care and education across the state, increasing access to childcare subsidies, strengthening the workforce pipeline, and more.

The decision to administer Caring for MI Future: Facilities Improvement Fund through IFF, a community development financial institution (CDFI), is also an example of the governor and MDE’s understanding of the role nonprofit intermediaries can play in the equitable implementation and distribution of federal funds. Nonprofit intermediaries are critical on-the-ground partners who know our communities best and can support community partners to implement projects that make a difference in families’ lives.

A model initiative

Moreover, this initiative is a model for how federal funds, from the American Rescue Plan to the Infrastructure Investment Jobs Act to the Inflation Reduction Act, can and should be distributed through community-based intermediaries. These organizations can provide the necessary technical assistance to support implementation (such as supports around contracting or project budgeting), leverage relationships in community to reach under-reached providers, leverage high quality research to inform need, and, when at scale, have the systems and capacity to manage funds at this scale to ensure that federal funds can be used by those who haven’t traditionally been able to access these programs.

IFF comes to this effort with a track record of success as seen at LACC Childcare Center and the scores of other program beneficiaries. In administering a pooled fund that reached providers across Detroit, and later across Michigan, IFF has demonstrated how nonprofit intermediaries can play a leadership role in aggregating funding, ensuring responsible stewardship of funding, and reaching those most in need.

Indeed, over the course of the program, IFF has centered community voice and provider needs to continually refine the program – adding elements like culturally responsive technical assistance for grant applications, support for providers to identify and work with construction contractors, building a network of providers for shared learning, and more. The combination of grant funds and technical assistance ensured the success of each of these projects, giving our children and families access to the physical spaces they deserve.

For 35 years, IFF has worked at the intersection of facilities and finance to provide nonprofit organizations with the ability to have the space they need to serve their communities. While the work expands into many sectors, the early childhood education (ECE) sector has been a focus for decades. Considerable research documents the physiological and psychological effects of physical space on humans, and the importance of design in helping people to heal, learn, and feel calm, safe and cared for.

A challenge and an opportunity

Childcare facilities are the earliest spaces developing minds encounter. Their design and implementation should facilitate sensations of learning, play, security, warmth, sleep and recreation throughout the day. Unfortunately, as we know, the business economics of ECE leave little to no money for quality facilities, which is why the Caring for MI Future grant program is such an extraordinary opportunity. It recognizes government’s role in providing funding for necessary quality facilities.

IFF’s work in the ECE sector in Michigan began with a robust needs assessment looking closely at individual communities – the childcare providers in the area and the people that live there – to see a complete picture of what may affect families’ ability to access childcare.

Putting this research into practice with a program like Learning Spaces provides further interaction with community providers and the real challenges they face, while also providing them with opportunities to learn about leading facilities practices. This partnership allows us to allocate precious resources towards facility improvements that most benefit children and staff. Strategic efforts like Learning Spaces work to thoughtfully multiple the impact of allocated dollars and are examples of how aligning programmatic offerings with facilities quality supports the entre childcare ecosystem.

As a key partner with Kresge, Kellogg and others in establishing Hope Starts Here, an initiative focused on making Detroit an equitable, world-class city for its youngest residents and their families, IFF has worked to leverage local leadership, research capabilities, financing and facilities expertise to effect positive change in Detroit’s ECE landscape. All of our collective efforts – including Caring for MI Future – ladder up to support the goal of providing quality access to all children across Detroit and Wayne County.

Role for Community Development Financial Institutions

This partnership with the State of Michigan demonstrates how government can partner with CDFIs to expand access to federal funds and help implement federal policies that will transform our cities and neighborhoods.

Across the country, state and local governments are partnering with CDFIs as intermediaries to get federal funds to the people that need it most. Capital tends to flow to where it’s easiest and most profitable, which is often a formula for perpetuating inequity, particularly with human services oriented funding. Communities with more robust infrastructure and institutions are in a better position to quickly absorb grant capital, leaving needier communities out, increasing inequity. CDFIs understand that interrupting this formula requires a continuum of activities that build communities’ ability to absorb capital and have greater impact. CDFIs – with their deep connections to community and powerful toolbox of capital, data, policy knowledge, programs and initiatives, and execution ability, can take a more strategic response for distributing capital.

That strategic response starts with data around need (like the ECE Needs Assessment that Kresge and IFF conducted to inform the work in Detroit as mentioned above) and the ability for CDFIs to implement programs and initiatives that prioritize accessibility and equitable deployment of grants dollars. Taking small steps like translation and accessibility offerings, alongside larger initiatives like local capacity building efforts or leaning into partnerships with other organizations across the entire state to reach even the most rural communities.

Government and philanthropy are now understanding that CDFI intermediaries are a proven way to better ensure their funds are invested equitably and with maximum impact. IFF’s role in facilitating the Caring for MI Future: Facilities Improvement Fund is just one example. Caring for MI Future, alone, is partnering with another CDFI, First Children’s Finance (FCF), to implement two initiatives – expanding access in rural areas and providing comprehensive business capacity building. The Minnesota Department of Human Services has contracted with FCF to implement the Childcare Facility Revitalization Grants program in Minnesota. Local Initiatives Support Corporation (LISC) leads the Rhode Island Childcare and Early Learning Facilities Fund, in partnership with the State of Rhode Island. Meanwhile, Low Income Investment Fund (LIIF) has been facilitating similar programs in Washington, D.C., New York City, and California. In all these cases, CDFIs have the sector expertise and the deep connection to community to distribute funding to the neighborhoods that need it most and have had less access.

Grant programs like Caring for MI Future are proving the success CDFIs and state government can have when they work together, and ECE isn’t the only sector that can benefit. CDFIs were established to move capital and much needed resources to communities that have historically been under-served and under-resourced. And while ECE is a necessary sector, so is health care, accessible housing, human services, and healthy food, emphasizing the role that CDFIs intermediary can play across sectors.

While the money funding Caring for MI Future is a one-time opportunity initiated through the American Rescue Plan Act, this way of working does not need to be. Utilizing CDFIs, their relationships and deep connections to community, is now a proven way to get capital out the door and make system level changes that benefit all communities.

Wendy Lewis Jackson is the managing director of the Kresge Foundation Detroit Program. Joe Neri is the chief executive officer of IFF.