As many child care centers across the country face possible closure after American Rescue Plan funding expired this fall, Minnesota stood out in this sector as state-allocated funds came online to compensate. But child care advocates and businesses say there’s a ways to go before early child care programs can be accessible and affordable to all families.
In anticipation of the expiration of federal funding, the state legislature approved $1.3 billion in child care funding in its last session. With this funding, Minnesota launched its Great Start Compensation Support Program, allocating $316 million to child care providers to increase employee compensation and benefits. The program started shortly after Child Care Stabilization Grants through the American Rescue Plan came to an end on September 30.
For Kristen Denzer, CEO and founder of Tierra Encantada, the state grant program means she can increase employee compensation. But she told TCB, this only helps solve one piece of the puzzle.
“It’s really nice because it does address the employee side, the compensation side, but it doesn’t help as much with the family side,” she said. “For families that are maybe in the middle-income area where they make just enough and don’t qualify for county assistance, they don’t make enough to afford center-based care.”
What’s driving the problem?
Well before American Rescue Plan funding, the child care sector was significantly underfunded, said Cisa Keller, senior vice president of early childhood programs for Minnesota-based nonprofit Think Small. The problem comes in two parts: the financial burden placed on families seeking child care and a lack of funding for child care centers to keep the doors open and pay child care workers a living wage.
Child care is one of the most significant expenses that Minnesotan families face. Infant care in particular costs almost $5,000 more per year than in-state college tuition and 30.8 percent more than average rent, according to a cost modeling report issued by the Department of Human Services released earlier this year. According to the report, the cost of care for an infant is over $20,000 a year. It’s around $12,000 to $16,000 per year for a toddler and around $9,000 to $12,000 for a preschooler.
Finding open spots for children is a challenge in itself. The child care industry shed tens of thousands of jobs during the early days of Covid-19. But this decline has been happening for years. Licensed facilities in the state were down 44% as of March this year compared to 2007, according to the Star Tribune.
And worker shortages in this sector are no surprise, given relatively low pay in the industry. The Department of Human Services report showed that a lead early child care teacher who has a degree is making on average somewhere between $17-$19 an hour.
As Keller put it: “That’s not a great situation.”
In part, low wages are due to limitations in classroom size, Keller noted.
While a K-12 classroom will often have one teacher to every 30 students, an early child care classroom can only have four babies per adult, seven toddlers per adult, and 10 preschoolers per adult, she said. With this kind of staffing need, there isn’t enough public money to cover that cost. “So we’re asking parents to pay the bulk of the money at a time when they are making the least amount of money,” Keller said.
The state funding passed this year includes the $316 million in monthly grants to child care facilities in 2024 and 2025, and $260 million over every two years that follow. Think Small, the Twin Cities nonprofit dedicated to child care, advocated for the funding passed this year.
“But, even with (the legislation), we still have significant gaps,” Keller said. “I’m not going to sugarcoat it — this is basically putting a band-aid on a gaping wound… So we’re kind of keeping the lights on, but we’re just barely doing that.”
Also this year, Minnesota legislation implemented an increase to Child Care Assistance Program (CCAP) provider reimbursement rates, which increased to the 75th percentile of the market rate here, the federal government’s own recommended rate. CCAP is a program that receives both federal and state funding to help families pay for child care costs. In Minnesota, counties administer the program with state and federal oversight.
In a blog post to Think Small’s website, Clare Sanford, vice president of government and community relations for child care provider New Horizon, outlined what this increase means in the state. Minnesota was once a leader in CCAP funding, she wrote. But during 2003 budget cuts, the state slashed CCAP funding. In 2020, Minnesota was only in the 25th percentile of CCAP rates. “That meant the rates covered the full costs of care at fewer than 1 in 4 child care providers, putting both families and providers in a difficult, if not impossible, position,” Sanford wrote.
There are many other components to the state funding passed this year and many will not be seen fully until years to come. In another blog post, Think Small detailed the rollout of state funding and programming up until 2028.
Why it matters
A 2020 report by the Itasca Project highlighted the importance of brain development during a child’s first 1,000 days of life, making a business case for supporting employees as they raise children. It’s important to look to research like this when crafting policies around early child care, Keller said.
“When we think about those first five years and what we know about brain development and how important those first five years are, this really is a public good, right? We need every child to be ready for kindergarten… We need to be investing in it as a public good, just as we invest in transportation, as we invest in K-12, as we invest in public health,” Keller said
Moving forward, Keller emphasized that it’s important to remember the crisis in child care funding was happening long before Covid. She calls the pandemic the “breaking point.” Suddenly every family, regardless of where they lived or what industry they worked in, was put into a place where child care was more essential than it ever had been before.
And there is certainly more needed, she said. But, with 20 years of experience in child care, she is seeing a shift, which showed in the Minnesota legislature this last session. “We aren’t necessarily having the conversation of: Should we be investing in early childhood? The conversation is much more about: how do we?”
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