The real costs of child care in America


States are buying into the idea of helping providers buy and run software to assist with management needs. New Mexico recently partnered with Wonderschool to use its technology platform to assist child care providers, especially small centers and family providers.

Washington state providers told InvestigateWest about other ways in addition to looking at staff ratios and scale that governments could further assist them:

  • To help with what one child care company executive called “astronomically unaffordable” real estate prices, cities or counties could designate some commercial locations as low-rent, highly subsidized properties for nonprofit child care providers.
  • The state’s Early Learning Facilities program already offers grants or very low-interest loans to providers seeking to open or expand their facilities. These providers must serve low-income families that use state subsidies to pay for child care. In the next few years, about $40 million will be available, including money to help providers apply.
  • The state could streamline its 90-day approval process for new child care sites, so that providers are not paying rent for several months before a center can open and begin making money.
  • The state could create a shared risk pool for small providers to buy health insurance for their workers and workers’ families. A new program funded by the state will provide free health insurance for child care workers whose households earn less than 300% of the federal poverty level. But it will not cover all workers, nor any dependents.

And, finally, providers face the high costs of low-wage jobs in the form of worker training and turnover expenses. They want to figure out how to pay child care workers more, with wages and benefits that adequately value their work, in part so that workers will stay longer and providers won’t have to continuously train replacements. 

State and federal support is already a key factor in the labyrinthine world of child care finance. Regional and state entities, such as Washington state’s Educational Service Districts. or ESDs, help deliver and add to federal aid for providers and parents. The service districts are public entities that “provide cooperative services” across public, tribal and some private schools offering K-12 education.

In south central Washington, for instance, ESD 105’s early learning program serves kids as a contractor for the federal Head Start program and for the Early Childhood Education and Assistance Program (ECEAP), which provide free preschool and supportive services for low-income families.

Stacie Marez, director of ECEAP and community partnerships at ESD 105, said the high rate of turnover resulting from low wages and lack of benefits means ECEAP programs at child care centers are constantly having to train new workers. When the three-year professional development cycle finishes, she said, “it’s just about the time we lose them to the school district.”

The school district can run state-funded ECEAP programs with better pay and benefits because of the district’s diversified funding sources, centralized administration (like shared services) and absorption of some ECEAP programs’ expenses, such as utilities and classroom space.

The prices we pay for care

Child care providers bill what they think community families can pay, not what it costs to run a financially stable business. But those “private pay” rates, also known as market rates, aren’t always high enough to keep providers in business.

The state sets Working Connections Child Care subsidy rates based on surveys that show what providers are charging in a particular area of the state. Working Connections is a program for low-income families with children up to 12 years old. The process to set rates for ECEAP-funded slots is more complicated.

Families eligible for subsidies find a participating provider to accept their children. The state then pays the provider. With ECEAP, parents pay nothing; with Working Connections, parents pay a share of that rate as a copayment, from zero to $215 per month, depending on their income.

Even if the subsidy rates were 100% of market rate, they would underpay many providers. The Fair Start for Kids Act just increased Working Connections subsidies from 65% to 85% of market rate and raised ECEAP rates by 10%.

That should help. But as Joel Ryan, executive director of the Washington State Association of Head Start and ECEAP, said, “Maybe we can get the subsidy rate high enough that it’s not terrible, but it doesn’t offset the real costs of child care.” Many providers will still face a loss from the state’s rates, and most families will continue to pay full price.

Mary Curry estimated that, for this past spring, her costs per child per month were about $1,200, but the state subsidy rate was about $750 to $800. Curry had been making it work, in part, by reluctantly keeping staff expenses low, as so many providers do. “Funding was so low, but I could make it work because my children were grown and I didn’t have to support them at home anymore,” she said. “My husband is the one who gives me this opportunity to do this, because he carries the overhead.”

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