A single parent with two children has to be making $40,320 a year or less in order to qualify for our subsidy program. A family of four is limited to $48,600 a year. If you’re making even a dollar more than that, you’re paying the full price of child care costs.
Everyone knows that the cost of child care has risen steadily in recent years. We know too that the average family’s wages have not kept pace with this rising cost. How does the State help? We provide subsidies to low-income families so that they can access high-quality child care in the communities where they live. These subsidies pay the owners and employees of Family Home and Child Care Centers to deliver early learning services.
So are the providers raking in money hand-over-fist when they accept subsidy payments? The simple answer is no. Our federal funding partners from the Child Care and Development Fund (CCDF) want our subsidy rates to be at in the 75th percentile of market-rate child care , and our state is nowhere close to that. That’s why our Governor put into his budget proposal this year a 2% base rate increase for Family Homes, and a tiered reimbursement increase for Child Care Centers. That was to get us closer to that 75th percentile before accounting for the January minimum wage increase.
We know that minimum wage increases enacted in I-1433 will benefit child care workers. Hopefully it will have a positive influence on childcare quality given the association between employee compensation and childcare quality. However (and that’s a big however) there are some very real problems this wage increase creates for the child care system.
In order to understand the effects of I-433 on the child care system, we conducted a Minimum Wage Impact Survey Analysis. This report suggests that costs for providers are going up 1% for Family Homes and 3.5% for Child Care Centers, in addition to cost increases as a result of inflation.
The biggest element of cost for child care providers is labor (about 60%, significantly higher than most other business types). If we drive down their revenue relative to their costs because of wage increases they have only a few options:
- Pass the increased costs onto private-pay families. This hurts the middle class and those struggling to make it into the middle class (remember the part above about sky-rocketing child care costs?)
- Stop serving children on subsidy. This will bankrupt small businesses who rely on subsidy families for their business model and will force more families into dangerous, unlicensed care scenarios.
- Hire less educated, lower quality staff. This will reduce educational outcomes.
These are not options that child care providers like, and they are not ones we want to see either. We want to get more children into high-quality early learning programs so that we can get them ready for kindergarten, regardless of race or family income. We want to ensure that every parent or guardian who waives goodbye to their child at the beginning of the day can feel confident about his or her safety.
To keep the system whole, to not unduly burden middle class families, and to continue our quest for quality, we need to be thinking about subsidy base rates.