State plans $100M to boost child care programs after pandemic downturn


The state intends to steer $100 million to support a goal of opening 1,000 new child care programs over the next two and a half years.

Under the Caring for MI Future initiative from Gov. Gretchen Whitmer’s administration, $51.1 million would go to grants for child care operators to renovate and upgrade facilities to meet licensing and quality standards. The state plans to begin making the grants available this fall.

Caring for MI Future would direct another $23 million in startup funding for child care businesses, either before or after they secure state licensing, and $11.4 million would assist operators to recruit, train, retain and develop staff.

The child care industry was “hit especially hard” from the effects of the pandemic, said Michigan Department of Licensing and Regulatory Affairs Director Orlene Hawks. Since the pandemic began, Michigan has lost more than 9,000 day care workers, Hawks added.

That has created “an insurmountable road block for parents trying to return to a normal work life, and has impacted the labor pool that every employer, especially small businesses, rely on,” she said.

When rolling out Caring for MI Future in early May, Whitmer and state officials said nearly half of Michigan families live in communities that lack adequate child care capacity.

“Quality child care programs are the silent drivers of our economy, and that’s because without safe, reliable and affordable child care, many parents — especially women — wouldn’t be able to support their families, realize their dreams, maximize their potential, and help drive our post-pandemic recovery,” Hawks said in a recent briefing hosted by the Small Business Association of Michigan. “This real implication for families is something that we take very seriously. Women have had to leave the workforce, families have had to make real hard decisions, and it’s had real implications for small business owners and executives who need a reliable and diverse workforce to support their businesses.” 

Labor force implications

Adequate access to child care emerged as a significant business issue during the pandemic, contributing to an acute labor shortage that limits the state’s potential economic growth.

Michigan’s labor force as of April remained nearly 100,000 people below February 2020, just before the COVID-19 pandemic swept into Michigan.

Census data in a recent report by Business Leaders for Michigan show Michigan’s labor participation rate lags other Great Lakes states across all education levels and for women with school-age children or younger, despite similar demographic profiles.

A lack of available child care has often been cited as a reason for the decline of women in the workforce. Business Leaders for Michigan’s recent “Compete to Win” report that shows Michigan ranks 41st in the labor participation rate also includes a recommendation to “remove childcare as (a) barrier to workforce engagement and career progression.”

“How do you get more people into the workforce? How do you keep them there and moving along a career pathway? These are issues that will hurt us in the future if we don’t address them today, and they’re hurting us now,” said Business Leaders for Michigan CEO Jeff Donofrio.

Among families with children 6 years old or younger, the female labor participation rate in Michigan is 74.7 percent, which compares to a 77.5 percent average among Indiana, Illinois, Ohio, Minnesota, Wisconsin and Pennsylvania, according to Business Leaders for Michigan.

Women with children 5 years old and younger left the workforce during the pandemic at three times the rate as men.

“So child care becomes one of those that I think we have to take on and we have to address,” Donofrio said in a recent interview with MiBiz. “Affordable, high-quality child care that allows parents to be able to engage in the workforce and then be able to progress in their career is going to be critical for us.”

Starting new businesses

Caring for MI Future is part of a $1.4 billion effort to improve child care access in Michigan that Whitmer proposed and the Legislature approved last year using one-time federal pandemic relief funding.

The package included higher pay and bonuses for day care workers, grants to stabilize day care operators hurt by the effects of the pandemic, support for the formation of new centers, and funding to expand capacity for infants and toddlers.

As well, the state’s present fiscal year budget altered the income threshold at which parents can receive a state subsidy to pay for child care from 150 percent of the federal poverty level to 185 percent, making an estimated 105,000 households eligible for assistance. The income threshold falls back to 160 percent of the federal poverty level in two years.

Of the state’s $100 million commitment to support increased child care capacity, the remaining $14.3 million will go to market assessments, assisting operators in identifying spaces for new child care centers, complying with health and safety regulations that include local zoning requirements, and crafting a business plan.

“For any child care entrepreneur who has dreamed of starting their own business, now is the time to start that journey,” Hawks said.

That journey, though, isn’t always easy. It took Lindsey Potter 10 months to get Bright Light Early Care and Education LLC off the ground in Battle Creek. Those months were spent refurbishing a historic barn, navigating through labor shortages and working to meet layers of regulations. Preparing for opening day was Potter’s full-time job.

Working through a U.S. Small Business Administration loan program, a significant portion of the startup was covered by private investors. The center is still paying returns on those investments, which were necessary to open the doors. 

“Conventional lenders just aren’t in a place to do this type of work,” Potter said. “The return on investment isn’t high in child care, so there isn’t a lot of money left on the table to go back to paying back a loan, and banks know that.”

Through Caring for MI Future, the Michigan Department of Licensing and Regulatory Affairs will provide ongoing support for day care operators to ensure “these new small business owners have the resources and knowledge they need to stay in business,” Hawks said.

The department will connect “the best on-the-ground navigators familiar with the best practices in the industry with interested entrepreneurs to inform and assist them in starting their own child care business,” she said.

“It’s not just a matter for us to get them in and get them open, but we want to be there and we want to support you to stay in business as well,” Hawks said during the SBAM briefing. “We still understand that opening child care sites is only part of the solution.”

SBAM CEO Brian Calley said he likes the one-stop shop approach the Department of Licensing and Regulatory Affairs took to craft Caring for MI Future. Calley also lauded the department for working with day care operators to develop the initiative.

“This really is small business-centric to help overall with workforce shortages and low labor participation rates we’re seeing today, and this is one component of that,” Calley said. 

Editorial Intern Abigail Ham contributed reporting to this story.

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