North Carolina childcare crisis costs $3 billion yearly, study shows

The System Mississippi Built

In August 2023, the Mississippi Department of Human Services partnered with Wonderschool to launch a statewide substitute-teaching pool for childcare centers. By October 31, two months later, just ahead of flu season, the Substitute Teaching Pool (SubPool) launched with a focus on 15 priority counties and a goal of statewide coverage, reaching communities from the Delta to the Gulf Coast. The platform recruits, screens, trains, and onboards substitutes, then matches them to open shifts through an algorithmic marketplace that filters for reliability and geographic fit. Providers post half- or full-day jobs; substitutes within a configurable radius receive alerts and apply. The provider reviews the candidate and hires. Every substitute clears Mississippi's background-check and training requirements before stepping into a classroom.

MDHS directed Wonderschool to make coverage universal from day one, not just in the 15 priority counties: Jefferson, Hinds, Wilkinson, Washington, Humphreys, Noxubee, Coahoma, Claiborne, Issaquena, Forrest, Warren, Clay, Lee, Madison, and Benton. "From the beginning, accessibility was a priority," the company's case study notes. "The goal was not simply to serve high-density areas, but to ensure that providers in rural regions had the same access to substitute support as those in larger cities."

Substitutes choose between two tiers. Caregivers (18+, high-school diploma or equivalent, or three years documented childcare experience) start at $11 an hour. Director Designees (18+, high-school diploma, two years in a licensed facility, plus three state-mandated trainings) start at $16. Both tiers must pass FBI fingerprint and Child Abuse Registry checks, complete orientation, and finish CPR/First Aid within 90 days. Hours worked count toward the 480-hour Child Development Associate credential, a deliberate pipeline into full-time early-childhood roles.

A tiered bonus structure accelerates participation. A $75 "First Job Bonus" pays out if a substitute works within 30 days of onboarding. After 40 hours, a $150 "Loyal User" bonus triggers; another $150 arrives every 200 hours thereafter. Substitutes logging 150-plus hours in a calendar month earn $300. Trips exceeding 60 miles round-trip reimburse at $0.655 per mile beyond that threshold. A $250 referral fee rewards substitutes who bring in peers who clear screening and hit 40 hours. The five-step onboarding (apply, interview, background screen, orientation, register) takes most candidates days, not weeks.

A Bank Bets on the Model

The model caught private capital's attention in North Carolina. In 2025, Live Oak Bank committed $600,000 over two years to launch the New Hanover & Brunswick County Substitute Teaching Pool, a three-way partnership among the bank, the Wonderschool Foundation, and Wonderschool. Wonderschool operates the platform, recruits and credentials substitutes, and handles matching; the foundation provides wraparound support; Live Oak Bank funds the contract. Licensed centers and family childcare programs in both counties now draw from the same pool. North Carolina's Division of Child Development and Early Education licensing rules apply (background-check qualification letter, annual TB screening, required health-and-safety trainings), but the operational playbook mirrors Mississippi's.

Mississippi's SubPool became the country's largest statewide substitute-teaching pool built primarily for childcare centers. North Carolina's coastal pilot tests whether a bank-funded, county-scale version can replicate the mechanics without a state agency as the anchor client.

What the Numbers Show

The MDHS partnership generates $26 million in annual economic impact by keeping centers open and parents employed, Wonderschool reports. The mechanism is straightforward: providers post shifts, an alert goes out to screened substitutes within a geographic radius, the provider reviews the application and decides whether to hire. Once the provider approves recorded hours, the substitute is paid directly by the center, while Wonderschool layers on its own bonus structure to drive platform usage.

Early data from Mississippi suggests the model reduces closures. When a lead teacher calls out, a center with SubPool access can fill the gap in hours rather than days. That speed matters: a single uncovered classroom can force a center to turn away children or shut down for the day, cutting revenue and disrupting parents' work schedules. The platform's geographic matching, alerting substitutes within a defined radius, cuts travel time. Providers retain hiring authority, so quality control stays local.

North Carolina's two-county pilot replicates the Mississippi architecture. If the Mississippi results hold — stabilizing centers, absorbing turnover spikes, keeping parents in the workforce — the economic case for statewide expansion strengthens.

How Competitors and Districts Are Responding

Swing Education secured a $20 million growth loan from Runway Growth Capital in August 2025 (a first-lien term loan plus a revolving credit line) explicitly to address the "seasonal nature of the education sector," said Runway Chief Investment Officer Greg Greifeld. Swing CEO Asha Visweswaran called the capital a "pivotal moment" for expanding reach across the seven states and Washington, D.C., where the platform already serves thousands of K–12 districts. That deal closed barely two years after Wonderschool's own $25 million Series B, led by Goldman Sachs' One Million Black Women initiative with participation from Andreessen Horowitz, Uncork Capital, Unusual Ventures, Imaginable Futures, and Gaingels. The parallel fundraising arcs reveal a market splitting by segment: Swing owns K–12; Wonderschool is staking out early childhood.

Care.com's trajectory offers a cautionary tale. IAC acquired it for roughly $500 million in 2019, TechCrunch's data shows, betting on a $300 billion family-care market, TechCrunch reported, and a pivot toward "on-demand and transactional" matching, said IAC CEO Joey Levin. The stock jumped on the announcement but never recovered from a Wall Street Journal investigation into vetting shortfalls. Other startups, including Winnie, NeighborSchools, MyVillage, Kangarootime, and Kinside, focus on family-facing search, provider business tools, or employer-benefit channels. Imaginable Futures, spun out of Omidyar Network with $200 million invested, Imaginable Futures' figures put, and $150 million committed through 2024, backs both for-profit and public-sector plays but has not built a substitute pool of its own.

Public agencies are writing their own playbooks. Mississippi moved first, partnering with Wonderschool in August 2023 and launching the statewide SubPool by October 31. In North Carolina, the response has been legislative and philanthropic. Governor Roy Cooper's office has proposed $745 million in early-childhood investment, arguing the childcare crisis costs North Carolina more than $3 billion annually in lost wages, business activity, and tax revenue. Bipartisan legislation in the NCGA echoes the same diagnosis. The legislature provided $67.5 million to continue Child Care Stabilization Grants through December 2024 at a reduced funding level.

Local money moved faster than state appropriations. Live Oak Bank's contract went live in spring 2025; the first substitute from the new pool worked a shift at The Learning Tree in New Hanover County that May. Smart Start, meanwhile, continues administering the WAGE$ program with the Child Care Services Association, delivering education-based salary supplements to teachers, directors, and family providers in participating counties, a parallel retention lever that does not depend on substitute supply.

Policy Tools and the Gaps Between Them

North Carolina's child care stabilization grants — born from the 2021 American Rescue Plan Act's $805 million federal infusion — have functioned as the sector's life support. As of September 2024, those grants still propped up 3,763 facilities statewide. But the money was always temporary. When the federal spigot began to close, the legislature stepped in with $67.5 million to replace roughly three-quarters of the prior flow. The gap between what centers received and what they needed widened immediately: a net loss of 69 licensed programs from July to mid-September 2024, a 1.4 percent drop in three months. Since the grants fully expired in early 2025, the annualized closure rate has accelerated to 7 percent, up from 5.8 percent during the grant period. The final quarter of 2025 alone accounted for more than 12 percent of all pandemic-era losses. Family child care homes have borne the brunt, down 24 percent since February 2020; centers have slipped nearly 1 percent.

Wage supplement programs sit alongside stabilization grants as the other policy lever with teeth. Smart Start's WAGE$ program, administered with the association, pays education-based salary supplements in two semi-annual installments, a retention design that rewards staying put. The stabilization grants themselves include a secondary wage-enhancement track for programs that opt in. Both mechanisms acknowledge the same structural bind: for-profit centers operate on margins below 1 percent, per U.S. Treasury analysis, so raising pay without public subsidy means either hiking parent fees or cutting slots. Neither solves the market failure that keeps infant care at 28 percent above in-state public college tuition and consumes 35 percent of a single mother's median income.

The Tri-Share pilot — modeled on Michigan's employer-retention tool — splits child care costs among businesses, parents, and the state across 14 counties. Local Smart Start partnerships administer it. Participation remains voluntary and narrow, but advocates see the cost-sharing architecture as a natural vehicle for subsidizing substitute pool access: an employer buying into Tri-Share could earmark a portion for on-demand coverage, reducing the parent-fee pressure that drives closures.

Data Feeds Policy, Policy Funds Platforms

Platform data itself is becoming a policy input. Wonderschool's deployments in New Mexico, Indiana, and Nevada give those states real-time visibility into childcare deserts and staffing gaps, insight the company says governments now use to target investments. In North Carolina, the SubPool's geographic matching radius and fill-rate metrics could inform where the next stabilization dollar or WAGE$ supplement lands. The feedback loop is nascent but deliberate: the platform surfaces the shortage; policy funds the response; the platform delivers the labor.

Competitive pressure is hardening the market. Kelly Education grew one South Carolina district's sub pool from 100 to 650. Wonderschool's early-childhood focus and government-contract track record differentiate it, but the funding climate favors platforms that can demonstrate unit economics tied to public savings: reduced closure rates, lower parent-fee spikes, measurable labor-force re-entry. The Commerce Department's modeling puts the annual cost of the child care crisis at over $3 billion in those same categories. The high-estimate scenario projects that solving access for 31,000 prime-age caregivers would generate $13.3 billion in economic output and 68,000 jobs. Even the low estimate — 14,500 workers — yields $5.7 billion and 29,000 jobs.

The Window Ahead

The next phase of on-demand staffing in essential services will be written in budget line items. If the legislature converts the Live Oak Bank pilot into recurring appropriations, if the subsidy floor survives negotiation, if Tri-Share expands beyond its 14-county footprint, then the SubPool model becomes infrastructure rather than experiment. If not, the 7 percent annual closure rate becomes the new baseline, and the platform's bonus structure merely delays the inevitable. The policy window is open through the 2025 long session. What passes through it will determine whether substitute teaching pools remain philanthropic pilots or become a standard line item in the state's workforce strategy.

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