Economy/Economic Policy

Child Care Providers Fear Economic Undertow

Sunday, November 16, 2008

Child care providers in two Midwestern states have lobbied successfully for subsidies to keep their services affordable. But a strong economic undertow threatens to wash out the ground gained by both parents and providers.

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Advocates rally for child care subsidies

MINNEAPOLIS (WOMENSENEWS)--Child care providers in Minnesota and Illinois have been changing far more than diapers over the past five years.

They've also been forming diverse coalitions to make their services more affordable to lower-income clients, many of whom have been getting squeezed by state budget cutbacks. They have had many successes, such as free preschool for 3- and 4-year-olds and raising the income levels for subsidies.

Low-income families typically spend 93 percent of their income on the barest necessities: shelter, transportation and food, leaving just 7 percent for all other expenses including child care, a 2005 U.S. Department of Labor survey found. Even with subsidies, they pay as much as 15 percent of their gross adjusted income as co-payments to providers.

"I cannot think of a decade or five-year period where I have seen as much change," said Laurel S. Walker, CEO of Skip-A-Long Child Development Services, a 32-year-old organization of providers in Illinois and Iowa caring for 900 children.

But Walker, a seasoned volunteer advocate with Illinois Action for Children, a coalition of child care providers, early childhood educators and other allies based in Chicago, worries recent gains could get washed out by the strong undertow of a retreating economy.

In 2001 and 2004 she says she witnessed the domino effect of job losses forcing families to pull out of child care, precipitating provider closings, which in turn caused more unemployment.

"Could there be a bailout for early care providers?" Walker said. "These are the people we need to keep in business because we will need them when jobs start coming back."

The answer is probably not. But advocates say they'll continue to press for expanding subsidies to low- and middle-income families and for state-funded reimbursements to match providers' market fees.

"Our goal is to make sure there isn't any more erosion of the child care assistance program and to make the case for strengthening the system of support," said Susie Brown, executive director of Child Care Works, a Minneapolis group that promotes affordable, high-quality child care for low-income families. "There have been some encouraging messages from the president-elect about putting emphasis on early childhood care and education," she said referring to Sen. Barack Obama. "We're looking for some federal support."

$5 Billion Federal Subsidy

Child Care Assistance Program funds are allocated to each state through federal block grants. In 2008 about $5 billion in such funds helped states reimburse child care providers a percentage of their fees according to a sliding scale formula.

In Illinois, a big political achievement occurred in April, when state lawmakers raised eligibility guidelines for 100,000 families who receive child care subsidies to about $35,200 for a family of three, up from roughly $27,000. Minnesota has also increased eligibility guidelines to similar levels.

Pay raises as little as 5 or 10 cents an hour may cause parents to "income out" of subsidies while not helping them afford market rates for child care, so raising income eligibility is crucial for parents and the providers who depend on them.

Providers in both states say capping parent co-payments would be another key way to keep child care within many parents' reach.

Advocates prefer an indexed scale that increases parent co-payments gradually according to income levels but caps them around 10 percent. That mitigates the "cliff effect," or the sudden cutoff that can cause parents to refuse raises or promotions when their benefit is negated by having to pay market rates.

Illinois activists also helped push through "Preschool For All" legislation in 2006, the first in the nation to offer free preschool to all 3- and 4-year-olds, with priority for at-risk children. This year they must lobby to extend the 2006 bill before it runs out.

But if subsidies are cut due to overall budget rollbacks--or if state reimbursements don't keep pace with cost-of-living increases or market rates--families may be forced to pay more or find cheaper child care, often informal or unlicensed.

Minnesota Subsidies Frozen in 2001

In Minnesota, reimbursement to providers is frozen at 2001 levels, which amount to about 40 percent of market rates. Rates vary with children's ages, with full-time infant care the most costly, averaging $11,000 per year in Illinois and $13,000 in Minnesota. Illinois reimbursements are close to market rates in some parts of the state, said Wilson, but not in metropolitan Chicago.

If too many parents cut back on child care, providers face their own struggles to survive.

Sarahi Barco, who cares for three children at Little Stars Day Care in her St. Paul, Minn., home, knows that firsthand.

In 2005 Barco, the mother of a school-age girl, lost all her income for about a year when clients' child-care subsidies were cut and others lost their jobs.

Christine Wilson, director of public policy and advocacy with Illinois Action for Children, says its 1,300 members have gained political clout in Springfield by running letter-writing campaigns and lobbying legislators.

Minnesota and Illinois activists want to push harder this year to help families handle economic setbacks.

Illinois Action for Children members voted at their annual legislative agenda meeting in June to prioritize capping parent co-payments at 10 percent of income. They also decided to press for families to retain subsidy eligibility up to 300 percent of the poverty level, or roughly $53,000 for a family of three and $63,000 for a family of four.

Illinois Push for Tax Increase

Wilson says they'll also push to pass a revenue reform bill which would raise the state's constitutionally mandated flat individual income tax of 3 percent to 5 percent. They hope that bump will fund continuing increases to subsidized child care and reimbursement rates to providers.

She says earned-income tax credits--which apply to about 40 percent of taxpayers with two or more children earning less than $37,783 if single or $39,783 if married--will offset the effects of higher taxes and could make the difference between a child being in a stable, high-quality child care program or not.

Advocates have also been pressing for better pay and training opportunities.

In 2001, Illinois created an incentive fund that reached $7 million last year for early childhood educators to pursue higher education degrees. Laurie Walker said there was widespread agreement on the need for that fund and there'd be a "huge cry from the field should that fund be raided."

And last year both Minnesota and Illinois implemented a statewide rating system for child care providers.

Ellen Boyd is executive director of Wee Care Children's Center in Clearbrook, Minn., where up to 40 percent of families rely on subsidies. Balancing her budget is tough. She is reluctant to raise fees for parents in a rough economy, but on the other hand some of her employees can earn more at McDonald's.

"I see people who usually have a seasonal layoff getting laid off months ahead of time," said Boyd, also a volunteer district coordinator with Minnesota's advocacy organization Child Care Works. "Families are trying to decide between buying food or putting gas in their car, or whether they can afford an after-school program. It gets cold up here in the winter. Food costs are going up."

Kris Berggren is a Minneapolis freelance writer and parent of three, who once worked for six months at a child care center in rural Minnesota.

 
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