Ripple effects possible in child care industry

Significant changes are happening in how child care centers are funded, and officials are warning that they could result in shakeups within the industry.

A federally funded grant has been providing child care centers with $3 per hour per employee, which has increased the workers’ salaries beyond what their employer pays them. That subsidy, which was funded through the COVID-19-period American Rescue Plan, is coming to an end. That could lead to turnover if employers don’t cover the extra salary or higher rates for parents who pay for the services, said Aleem Hasham, who owns two Kiddie Academy locations in Albuquerque.

“It allowed our staff to continue working and reduce turnover by essentially giving them a little more, especially at a time where they needed it the most due to inflation and everything else,” Hasham said. “So that really did help us, it helped us tremendously. We were able to hire more. Our hiring was a little easier.”

Democratic lawmakers, including New Mexico Sens. Martin Heinrich and Ben Ray Luján, wrote a letter to President Biden last month warning that there could be closures and other disruptions throughout the country if there isn’t increased federal funding for the child care system.

State government officials, meanwhile, said New Mexico is in better shape compared to other states in terms of avoiding large-scale shakeups within the child care industry because of several investments the state has made in the last year.

New Mexico increased its reimbursement rates for centers that serve children who receive state assistance, and the state also expanded the income qualifications for the assistance program, said Sara Mickelson, the deputy secretary of the Early Childhood Education and Care Department.

“New Mexico is in a much better place than the majority of states (with) federal funding wrapping up,” Mickelson said. “We’re really at the beginning of this transition out of this (grant) program, and we feel confident ... in our strategy to make the most families eligible for child care assistance.”

She said families can qualify for state assistance even if they make 400% of the federal poverty limit and meet other qualifiers. She said about 80% of New Mexico families could receive state support.

Hasham said about 45% of the children at Kiddie Academy receive state assistance.

As his facilities, Hasham told employees he planned to cover the $3 subsidy so his employees will keep making the same salary.

“We are going to continue it for a period of time,” Hasham said. “But we don’t know how long.”

Barbara Tedrow, who operates Gold Star Academy & Childhood Development Center in the Farmington area, said the issue of what to do about the $3 per hour going away is something many centers in the state need to address.

“There could be a mass exodus of child care workers,” said Tedrow, who is also a board member for the New Mexico Child Care and Education Association.

Congressional lawmakers called on the president to provide child care centers with an additional $16 billion in federal funding annually to stabilize the businesses.

The members of Congress cited a report from the Century Foundation, which found that 70,000 child care programs across the country could be at risk of closing once the American Rescue Plan comes to an end.

In New Mexico, the foundation reported that a little more than 17,000 children could lose access to child care and 1,000 workers could lose their jobs if centers start to close.

“The broken child care market has resulted in an impossible tension between families, workers, and providers: child care providers cannot afford to run their businesses or pay adequate wages to their staff using revenue from parents alone, while child care costs are unaffordable and unsustainable for working families,” the lawmakers wrote.

Hasham said centers and families who rely on them live in a world of razor-thin margins. The centers are required to keep a set ratio of children to teachers.

“So even if the employee is amazing in every aspect ... they cannot educate more than what the state allows,” he said. “So your hands are tied ... to whatever ratios you’re operating within.”

He said even small changes in day care costs can have significant affects.

For example, he said his center lost dozens of families when the state increased how much the centers are compensated for families who receive state assistance. That’s because families are required to pay the gross receipts taxes. Increasing the reimbursement rate increased a family’s cost by about $40 per month, he said, which drove some families away from his two centers.

Hasham said that there could be disruptions to the child care system in New Mexico in the coming months. It’s possible centers could close or consolidate with other centers. There could also be a competitive market for employees if some increase pay is required to keep up with the expiring subsidy. It remains to be seen, he said.

But he’s hopeful that in the long run, policymakers will realize that pumping resources into early childhood education is an investment in a state’s future.

“If you bring good quality child care, the entire state can change. These individuals grew up to be good, well-rounded (people),” Hasham said. “They have a good structure, they have a good balance, they’re fed and they’re educated.”