Audio Child care industry fears effect of state cuts (story audio) Photos Infant care at the YWCA Molstad: Changes affect even families who don't get subsidies Bradley: No call for "sky-is-falling claims" View full slideshow (4 images) More from MPR Officials fear child care-to-welfare shift Your Voice Join the conversation with other MPR listeners in the News Forum.

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Child care industry fears effect of state cuts
by Jeff Horwich, Minnesota Public Radio
June 30, 2003

Katie Williams (standing), director of early childhood programs at the Minneapolis YWCA, says families on subsidies are a big part of their businesses. State budget changes will require cuts as the YWCA examines its own budget this summer. (MPR Photo/Jeff Horwich)

Many in Minnesota's child care industry are bracing for a shake-up starting in July, when changes to the state human services budget take effect. Lawmakers saved $86 million this spring through cuts to child care subsidies -- even more than the governor originally proposed. Some child care providers say the drop in state assistance will mean lower quality care, and may drive them out of business. The cuts' architects say the industry is over-reacting, and nothing so dramatic is in store.

Minneapolis, Minn. — Lawmakers made more than half-a-dozen changes to scale back state subsidized child care. More than 25,000 lower-income families will see their monthly co-payments go up, but most of the changes directly affect the hundreds of child care centers that watch their children.

Officials at the Minneapolis YWCA are still calculating the total impact to their budget. Out of 300 children in their child care programs, more than 75 percent are on state subsidies. Almost 40 percent of YWCA child care revenue comes from the state.

Director Katie Williams expects the full effect to unfold in the coming months. At the moment she is leaving one child care position unfilled, but that's probably just the beginning.

	Infant care at the YWCA

"We can do fewer field trips, we can buy no new equipment, but there's not much we can do," Williams says. "In the long run, we'll probably have to look at reducing the size of our program."

Lawmakers found the largest source of savings by freezing the rate at which centers are reimbursed for taking subsidy kids. Some in the industry worry this change alone will place high-quality care out of reach for families on state subsidies.

Chad Dunkley is president of the Minnesota Child Care Association and vice president of New Horizon child care centers. New Horizon has 57 locations around Minnesota, with a professionally educated staff and a standardized early childhood education curriculum. Dunkley says New Horizon rates will now far exceed what the state is willing to pay.

"New Horizon certainly isn't going to say we won't accept families on assistance programs," Dunkley says. But the rate freeze "makes New Horizon in most areas unaffordable for families on (subsidy) programs, and it makes many other centers unaffordable."

Dunkley worries poor families will be forced to choose low-quality care. State Representative Fran Bradley, R-Rochester, disagrees, calling the notion "hogwash" and "absolute nonsense." Bradley chairs the House Health and Human Services Policy Committee.

He agrees the changes will make it harder for subsidy families to afford the very best care. But Bradley says under the old system, it was unfair that families on state support actually had better access to top-notch facilities than ordinary working families.

"For those people who want to have a Montessori or a preschool with a lot of sophisticated education, I think the book is still out yet as to whether or not that really is the taxpayers' responsibility," Bradley says.

Bradley says the state will still be paying for care that is above average. On all levels, he believes the industry's outcry over the cuts is out of proportion.

"We were hearing that it was going to do terrible things, but when I asked (child care industry representatives) the question about how what proportion of the care across the state is state assistance, is taxpayer assistance, we were told it was only six percent" of the child care business done in Minnesota, Bradley says.

	Bradley: No call for "sky-is-falling claims"

"Well, if it's only six percent of your business, and you look at the reforms that we did, which were pretty modest, I don't know how in the world anyone can conclude that this is going to have a disastrous effect on the child care industry."

Families on state subsidies may be a small portion of the overall Minnesota child care market. But much of their business tends to be concentrated in financially vulnerable providers who may have the most to lose from the changes.

Pat provides licensed child care out of her home in St. Paul. Most of her families get subsidies, and to protect their privacy she wants to use only her first name.

Pat typically cares for eight to 10 kids during the day, but she is open whenever parents need her -- seven days a week, at all hours. Like many child care providers, she can't afford to buy health insurance. Her yearly income fluctuates, but never exceeds $20,000.

"Most of our income gets turned around and goes back toward the kids," Pat says. "(People) say, 'Why are you doing this?' It's gotta be the hugs. Because I'm not really making money...If I went to work at a fast food restaurant, I'd actually make more an hour."

Pat's families will see their co-payments increase anywhere from 30 to 100 percent. One single mother is losing the subsidy altogether, and can't afford the care without it. Rather than turn her away, Pat will watch her child for free.

Pat sets her rates at whatever the state is willing to pay. But those rates will now stay flat through 2005. Her bills will not.

"Unfortunately, would anybody like to talk to the power companies and everybody else and have them freeze their (rates) too, because we're going to really be in trouble," Pat says. "And that's what's really making us nervous, and making a lot of people want to quit."

If providers like Pat collapse, county officials worry parents may turn to unregulated forms of care. Sue Molstad works with 1,200 providers as a subsidy manager in Ramsey County, and says many home-based child care centers are already in financial trouble from the weak economy. If they leave the industry, Molstad says parents will look to neighbors, relatives and other unlicensed arrangements.

"Not saying that they can't be quality, but we know with licensed care there are all of the regulations that control that in terms of health and safety issues, training of the caregivers, background checks that are being done," Molstad says. "A lot of families are going to looking for that (unregulated) care."

	Molstad: Changes affect even families who don't get subsidies

But even those friends and relatives may be more reluctant to take on child care duties. The state previously reimbursed them at 90 percent of the rates used for child care centers. But in July those rates will drop to 80 percent. The method of payment is also changing, in a way that will to lower their payments even further.

As state money exits the system at various levels -- from these family arrangement to well-regarded chains like New Horizon -- Molstad foresees a domino effect. An already difficult business will become even less attractive. As centers close down or trim staff, the overall number of child care spaces in Minnesota will fall. Molstad says even families who don't use subsidies will have a hard time finding care that is affordable and convenient.

"All of this legislation for low-income families is eventually going to impact all families looking for child care," Molstad says. "There won't be as much, and there won't be enough."

Representative Fran Bradley says he realizes "how very important child care is. I find it incongruent, though, to be starting to make those kind of sky-is-falling claims."

Bradley says the free market will adequately determine how much child care, and what kinds, are available in Minnesota. He says the state distorted the market by getting involved in the first place, creating an arrangement that was unfair to taxpayers and unfair to many working families.

"I don't see how we can continue to have child care assistance be so out of balance with all the rest of our assistance programs," Bradley says. "I'm trying to be fair. This is not trying to out there being 'hatchet-person.' This is just trying to be fair, equitable, balanced."

Bradley says the state program is now more focused on its core mission: to make sure children of the state's most needy families have somewhere to go while their parents go to work. But the job, he says, is not done. Lawmakers will likely revisit child care for further reforms in future legislative sessions.

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