Careening off the cliff?

0323 Editorialcontent Childcare Crisis Feat

When child care advocates speak about the forthcoming “fiscal cliff,” they refer to the end of pandemic relief funding that was used to support child care in Wisconsin.

In January 2024, when those COVID relief dollars run out, will the new state budget now being debated provide the funding needed to pick up where pandemic funding leaves off? With the Legislative Fiscal Bureau estimating the state will end the current fiscal year with a whopping $7.1 billion surplus, many child care advocates believe Wisconsin has a historic opportunity to move beyond decades of limited public investment and fix what they believe is a broken child care business model.

“Fair market, free market economics don’t work in child care,” states Ruth Schmidt, executive director of the Wisconsin Early Childhood Association. “It’s a broken business model. You simply cannot charge parents enough to cover your real operating expenses and pay your staff a decent wage.”

Gov. Tony Evers, who redirected pandemic relief funds to child care, appears to agree. In his 2023-25 biennial budget proposal, Evers has proposed $340 million in additional support to make child care more affordable and accessible for working families and to support child care providers statewide. This includes a permanent investment in the Child Care Counts COVID-19 Stabilization Payment Program and the business-focused Partner Up! Program, which established employer-child care provider partnerships. In addition, Evers’s budget would defray child care costs for working families by expanding the Child and Dependent Care Credit, providing nearly $30 million in tax relief.

In addition to Schmidt, we spoke to Emilie Amundson, secretary of the Wisconsin Department of Children and Families (DCF); Donna Jost, manager of Madison College’s Early Learning Campus; Brenda Moore Fritz, owner of Academy of Little Vikings; Jesse Olson, division vice president and business unit manager for Cameca Instruments Inc.; Zach Brandon, president, Greater Madison Chamber of Commerce; and Rebecca Carlin, executive director, Wisconsin Youth Co.

Deserted care

In 2020, 92% of the participants in regional (and virtual, thanks to the pandemic) listening sessions characterized Wisconsin child care as inaccessible, according to the DCF. The agency pins the blame for that on fewer licensed child care programs and rising costs, which has produced long waiting lists. Adding to the parental challenge are nontraditional work hours and limited access to transportation.

As a result, so-called “child care deserts,” defined as places where three or more children compete for every available child care spot, are widespread in Wisconsin. Fifty-four percent of state residents live in a child care desert and 70% of rural Wisconsin is considered a child care desert.

The earlier the care, the more expensive it is. Infant care costs roughly $12,000 per year, and is equal to about 18% of a $68,000 median family income and 80% of a $15,000 estimated minimum wage income, according to a 2021 DCF needs assessment. That same assessment notes that average child care costs exceeded the cost of other essentials, such as rent ($10,000/year), in-state college tuition ($8,500/year), and food ($8,500/year).

That’s the case despite the fact that Wisconsin child care workers earn a modest $11–13 per hour — compared to the $19 per hour median wage earned by all Wisconsin workers — even though more than 70% of child care educators have completed college coursework or earned a degree. In addition, at least 48% of early child care programs lack health insurance benefits and only 52% of early child care workers report access to paid sick leave.

As a result, they are leaving the field, which negatively impacts the level of available care. DCF reports that 75% of child care programs experience staffing shortages and 50% of educators plan to leave the field in the next five years.

By using pandemic relief for child care, the state estimates that it helped more than 3,300 providers across the state keep their doors open, helped more than 22,000 child care professionals stay employed or become employed, and helped ensure care continued for more than 113,000 children across the state.

No organization was happier to hear about the governor’s budget proposals than WECA, which has conducted its own surveys that show child care programs have had to either reduce hours of operation or close classrooms because they could not hire more staff. In an October 2022 survey that included 1,173 Wisconsin participants, of those who are experiencing a staffing shortage, more than 45% are serving fewer children and nearly 52% report longer waitlists.

Survey participants said federal relief funds helped them stay afloat during the height of the pandemic, but as stabilization money runs out in Wisconsin, economic and labor pressures will cause the already tight child care supply to shrink to new levels. WECA also notes that child care educators are considering whether to leave the field, a possible exodus that will deepen the supply, quality, and affordability crises for years to come.

To stop the bleeding, state grant programs paid for by federal COVID relief dollars have sought to address compensation issues that impact recruitment and retention. The DCF started work in early 2020 to evaluate Wisconsin’s early care and education (ECE) system under the federal Preschool Development Grant Birth to Five (PDG). Since the start of the pandemic, the Evers administration has invested more than $824 million in federal relief funds to stabilize and grow the ECE community. The bulk of it goes into child care through a project called Child Care Counts, a mechanism the state set up to place payments directly into bank accounts to support child care programs that use it to better compensate their staff, cover other operating expenses, and generally keep tuition increases down.

The investment has helped reduce the number of permanent and temporary closures of licensed child care providers, but while there has been an increase, from 4,358 providers on March 20, 2020, to 4,548 providers as of December 2022, according to DCF, the composition has changed. Certain areas of the state, specifically the western and northern regions, have seen a decrease in providers while the southeast region has seen an increase.

In January 2022, the state increased the Wisconsin Shares subsidy rate from 35% to 80% of the estimated cost of child care. It was the first time in state history that Wisconsin has exceeded the federal subsidy recommendation. One month later, the state launched Project Growth, which aims to connect the business and early care and education communities. The program offers two unique grants aimed at making affordable child care more accessible and sustainable. One is the Partner Up! Grant Program, which focuses on supporting partnerships between businesses and child care providers by offering funding to businesses that purchase slots at existing regulated child care providers. In his budget plan, Evers would invest more than $22 million in the Partner Up! program to expand these partnerships.

These relatively new programs augment the DCF-funded REWARD Wisconsin Stipend Program, which was implemented in 2001 and provides a stipend to workers in the child care and early education field who have reached specified educational levels and stay in the field. In addition, the T.E.A.C.H. program, established in 1999, provides scholarships to the early care and education workforce to complete credit-based instruction, and it offers bonuses or raises when contract requirements are completed. Without these programs, more child care professionals would have left the field, which is why in February 2022, the Joint Committee on Finance approved an additional $30.6 million in funding for T.E.A.C.H. and REWARD, as well as $163.4 million for other programs to support the early care and education industry.

But will higher or even adequate fund­ing continue? A bipartisan coalition of lawmakers, including a unanimous vote in the Joint Finance Committee, approved using pandemic relief dollars for enhanced child care funding, but how will they view state tax revenue as a funding source?

In her 20 years at WECA, Schmidt has never seen the level of engagement in child care that exists now among community leadership, workforce development, economic development officials, and chambers of commerce. That’s reflected in a multimember coalition known as Raising Wisconsin, which consists of the Wisconsin Counties Association, the League of Municipalities, the Council of Churches, and primary health care associations — “all leaning in and saying, ‘We need this significant investment in child care to ensure that things don’t get worse,’” she states.

With Partner Up! Program grants, employers are getting in on the child care act as well. An employer pays at least 25% of the slot for their employee to get care, and the grant pays 75% of the slot, or the balance up to 100% (some employers pay more than 25%). The participating child care program gets the full rate of pay, and child care programs can apply for funding as employers to help their own workers.

Schmidt appreciates the fact it’s a public-private partnership and that it’s pegged to the true cost of child care, which helps child care providers better compensate their workers, but she is concerned about the program’s future expense to state taxpayers. “What’s great about it is that families don’t have to put a dime into it for the slot of care for their child,” she notes. “However, I would also say that is part of what is problematic about Partner Up! There is no sort of means testing connected with it right now, and so you may have employers who have employees that are solidly middle-income families, some potentially even higher middle income families, able to get free care, which is fabulous but also super expensive … It would be outrageously pricy to do Partner Up! as a statewide model.”

For Amundson, Partner Up! is an innovative way to bring the business community to the table, and she considers it a win-win-win for parents, caregivers, and businesses. By offering funding to the businesses that purchase slots at existing, regulated child care providers, it not only hardwires relationships between businesses and child care providers, but employers get another piece to solve their workforce recruitment and retention puzzle.

What goes unnoticed is how beneficial it is to child care providers. “That’s a guaranteed funding stream for that child care provider at the true cost of care, which is incredibly important because oftentimes, child care providers are not able to get close to the true cost of care,” Amundson notes. “So, we can see through the pandemic that child care providers have had to rely on parents either deciding to keep their kids in or pull their kids out, and it can be a really unstable funding picture.”

As she tours some of the more than 225 Wisconsin businesses that are taking advantage of the program, Amundson hears that it’s an easy program to use and she’s heard it described as a “no-brainer” for businesses. Obviously, the state funding makes Partner Up! an attractive proposition, but the infrastructure the state has built around the program is important to its success. The DCF has invested in business liaisons that work with the existing child care community to make good matches between the business and the child care provider, and that’s been important in getting the word out to businesses.

There is more tinkering to do, however. “Some of the questions that we’re asking, as we continue, is how do you build a program that steps down gradually?” Amundson asks. “Because of our grant funding, we weren’t able to build a step down into the initial round of this program. So, right now, it’s unfortunately a spigot that turns on. You get a year of free child care and then the program ends. That’s how it’s designed. Obviously, if we were designing a program that was really built for long-term success, we’d have a step down where potentially, the business would step up in terms of their commitment, potentially the employee would begin to braid in part of the funding, and then the state would step down its contribution over time. That’s the sort of long-term prospect that we would have for a program like this if we knew we had long-term sustainable funding.”

Noting the lack of income verification in the program, the DCF also is questioning the cost. “We do have data that shows the vast majority of participants in the program are operating in that bubble space between making a little too much money to qualify for subsidies through the Wisconsin Shares program but still struggling to pay for care, still struggling to pay for care in a two-income working household,” she says. “That’s the right slice. Figuring out what that cutoff could be and then frankly building in the technical verification of that — that would require additional infrastructure funding, but long term, that would be the direction to go for a program like Partner Up!”

Worse case scenario

What if the Republican-controlled legislature refuses to approve the governor’s plan to extend child care funding? Amundson fears that more child care programs will close, further exacerbating the accessibility issue, but she notes that lawmakers in both parties had a role in designing the pandemic-era programs, and if they listen to the stakeholders, they will continue programs they signed off on. 

One of those stakeholders is Brenda Moore Fritz, who owns and operates the Academy of Little Vikings, a Mount Horeb facility that cares for of children ages six weeks to 12 years. The center takes care of 165 children every day and, as one of the collaborating partners of the Mount Horeb School District, it contracts with the district to support its four-year-old-kindergarten program. At last count, it had 85 children on its waiting list, and its next opening for an infant is in January 2024.

Commenting on the pre-COVID child care business model, Moore Fritz notes that in group or licensed child care, facilities don’t make money when caring for infants and toddlers 2–1/2 years old and younger. The ratio of teachers per child — Academy of Little Vikings is required to have two teachers for every eight children in its infants and toddlers room — does not produce enough money to pay for the teachers. “It’s not until the children get to be three years of age or older where we can have more children in a classroom and actually start to pay for the wages for the teachers in the classroom,” she explains. “So, it’s a lopsided model. It makes some providers not want to enter into group child care for anybody under age two.”

To make child care a viable business, operators must have at least 100 children in order to spread the money around from the older children, where they are able to make more money, to pay for the teachers who care for infants and toddlers. If she can take care of a child from six weeks all the way through school age, and also care for them through the school-age years, and provide summer camp programming for them, that creates a good solid base for the center. “When I tell people how our business model worked, they often ask me why I would enter into a business where you know you’re not going to be able to make any money in the first 2-1/2 years for a child, but it’s always been a shell game as a business owner in early child care,” she explains. “You rob Peter to pay Paul within the system.”

Academy of Little Vikings was able to use the Partner Up! program as an employer and it has 10 children who are the staff’s children. The parents don’t have to pay for child care, and the center gets more than it would normally charge for tuition because it’s “on a true cost of care rate,” Moore Fritz notes. “They are actually giving me enough money for my infants to actually pay the teachers in that room and make a little bit of money too. From an employer standpoint, it’s huge windfall because if an employer is trying to attract employees, if they can get this Partner Up! money, they would be able to help subsidize child care and have a better opportunity to attract and retain employees.”

Another beneficiary is a small business owner who has three children enrolled at the facility, and so it gets Partner Up dollars from him as an employer. In return for the enhanced tuition, Moore Fritz has developed programs in which it gives monthly tuition rebates to families.

If there is no continuation of funding when the COVID relief runs out, Moore Fritz says it will be a disaster for those child care centers that have been utilizing the stabilization money. With wages having gone up, and 70% of all revenue devoted to paying those wages, it’s going to get tighter and tighter as months go by and she tries to retain staff. At the moment, they are used to getting a $500 per month bonus from the stabilization money, and she doesn’t know what’s going to happen to them in January 2024. In addition, the center’s expenses for groceries and supplies have reached the point where she’ll have to ask for a large tuition increase if child care funding goes away. “I have to live true to what my numbers are,” she states. “I don’t have any extra give.”

As the local leader of Cameca Instruments Inc., which designs and manufactures instrumentation used in government and university labs and in high-tech industrial firms, Olson appreciates the workforce benefits of participation in the Partner Up! Program. The company employs about 50 people in Dane County, and three of them have filled the slots the company has at local child care providers like Preschool of the Arts and Little Red Preschool.

All are middle class families that appreciate the way the program offsets their child care costs, which Olson views as another plus in the company’s benefits portfolio. “It’s also helped with regard to employee satisfaction, and so ultimately it helps with retention,” he notes. “They [employees] are very appreciative of the fact that we can offer this and offset their costs and they are very happy about that. From that perspective, it makes a happier employee and more productive employee. All the way around, it’s a win-win.”

If Olson could talk to state lawmakers about continuing the child care funding beyond January 2024, he would emphasize the workforce development aspects of it. “Recruitment is a challenge for us and having a benefit like this lets the employees know that we’re structuring our benefit programs to meet their needs,” he states. “So, it definitely helps us attract quality candidates and retain them, but it’s also something that, as our workforce gets more diverse, which is a strong initiative for us, the set of benefits that we offer becomes more diverse as well. Strengthening it makes us more attractive to a range of prospective employees, and that’s critical in the environment that we’re in — where recruiting is definitely a challenge.”

Public-private one-two punch

As the president of a chamber of commerce, Zach Brandon is supposed to be a fierce advocate for the free market, and in many cases he is. But in the case of child care, he believes the market has failed and it’s his responsibility to fix it with a public-private solution. That market failure is not a reflection of those who work in child care — it’s simply a lack of capacity.

“Madison and Dane County are growing,” Brandon notes. “We [Dane County] added 20,000 people during the pandemic. The decade before that, we added 73,000 people … and 83% of that growth came from in-migration and 17% came from births. Most of the people we’re bringing in are of child-rearing age, so the child care challenge isn’t going away.”

The capacity issue won’t be solved with state funding alone, he cautions. State funding will be important to make child care more affordable, but Wisconsin will need a true public-private partnership in which businesses view child care as an employee benefit advantage. He cited employers like Kwik Trip, which last summer opened an on-site child care center for those who work at company headquarters in La Crosse, and Promega, which sponsors the Woods Hollow Children’s Center on behalf of employees. The chamber also thinks there are interesting ideas around loan-loss reserve funds, where the private sector creates reserve funds that allow banks to make investments in child care.

In Brandon’s view, Madison and Wisconsin have a chance to demonstrate historic innovation rather than fall back on measures created elsewhere. “We believe child care could be a place where there is a public-private partnership that establishes a Wisconsin model that says we believe that we can do this differently. We believe there are tools available and that the public sector and the private sector collaborating will solve this.”

Out-of-school, not out of mind 

Count Rebecca Carlin among those applauding Gov. Tony Evers’ plans to continue child care funding. Carlin is executive director of the Wisconsin Youth Co., a nonprofit organization based in Dane County that serves about 3,000 children and teens each year in out-of-school-time programs, which is another term for after-school child care. As such, her organization and the parents and children it serves have benefited from the governor’s decision to pump COVID relief money into child care and continue to support it with state funding as part of his biennial budget plan.

As Carlin notes, many people think of child care as babies and toddlers — stopping when a child reaches school age. Yet there is a gap for child care once a child reaches kindergarten because parents don’t stop needing child care at this stage. That point was hammered home during the COVID-19 pandemic, when schools closed and child care needs persisted.

Wisconsin Youth Co. provides after-school programming in Dane and Waukesha counties. Taking advantage of a $1 million Beyond the Classroom grant, it continued to operate in-person care even when schools were closed (which in Madison was most of the 2020-2021 school year). For parents who don’t have the ability to work from home, such as grocery workers and post office employees, they could not stay home with children who had nowhere to go during the day. Unfortunately for them, after-school programming falls in an unusual place because it’s not traditional child care, so it doesn’t fall under the purview of the state Department of Children and Families, and it’s not considered part of a school, so it’s not governed by the Department of Public Instruction.

When the Evers administration launched Child Care Counts Grant funding at the beginning of pandemic, followed by Beyond the Classroom Grant funding, it allowed Wisconsin Youth Co. to maintain staffing levels and provide in-person child care for 541 children during summer 2021 and to 950 children during the 2021-2022 school year, to 725 children during summer 2022, and to children during the current school year. 

That’s why the stakes are high — for both families and child care centers — for a continuation of child care funding as part of the next state budget. “Not having public funding continue means we would have to find those dollars elsewhere,” Carlin notes, “and that would likely mean an increase in cost for families. We know that would really be a challenge.”

Madison College not taking child care for granted

Donna Jost, manager of Madison College’s Early Learning Campus, has a homework assignment on her hands. It’s in the form of a $2.9 million Wisconsin Innovation Grant, an initiative of the Wisconsin Department of Workforce Development, to assess child care needs in its service areas.

Jost is the co-lead on the grant with Jessica Cioci, the dean in the School of Human and Protective Services at Madison College. As part of the grant, they are reviewing child care needs and possibilities at the Goodman South campus, the Commercial Avenue campus, and at Madison College’s four regional campuses in Reedsburg, Portage, Fort Atkinson, and Watertown.

“The college wrote the grant with the idea that we would take on this child care crisis and try to figure out how we might better serve our student population and therefore better serve the communities in which our campuses are housed,” Jost explains. “We have campus-based child care at the Truax campus, but it’s the only campus that has child care. That facility is only licensed for 50 children and we have 90 children on the waitlist.”

Among other goals written into the grant, the college wants to increase access to child care for its parenting students, review its internal policies and practices for supporting parenting students, increase the early child care teacher pipeline, and review how the college’s child care program and its early childhood academic program — an early childhood associate degree program — work together.

Growing the pipeline of child care teachers is one of the areas where Madison College can have internal and external impact. So, another possibility is establishing scholarships for professional development for incoming early childhood teachers who are either interested in a certificate or a two-year associate degree program or in a transfer to a four-year degree program. Since the onset of the pandemic, staffing needs have become more acute. “When the pandemic started in 2020, child care nationally lost more than 8% of what was already a strained workforce,” Jost notes. “It is one of the few workforces that has not started to see a bounce back as everything has started to open up.”

Funding to support the expansion of child care for the Goodman South campus is another potential outcome because that area is considered a significant child care desert, particularly for families in poverty and families with infants and toddlers.

Whatever the outcome, solutions are the next step after the grant runs out in December 2024. “We exist within each of these communities,” Jost notes, “and so we are working in these communities as a partner with them.”