Minnesota childcare still in crisis, regulatory reform can help
The COVID-19 pandemic and associated stay-at-home, social distancing, and cleaning orders dealt a heavy blow to the childcare industry. Family childcare providers, for instance, saw rising costs due to new cleaning and distancing requirements, while revenues declined due lower enrollment. While the federal and Minnesota state government provided money to compensate for these increased costs, numerous providers left the industry, and many others were left struggling.
Unfortunately, according to a recent survey from the Federal Reserve Bank of Minneapolis, the childcare industry remains in crisis. Particularly, licensed day care centers are starting to report higher levels of distress compared to previous surveys.
The survey
According to the survey:
86 percent of child care business owners and managers agreed there is a crisis.
That number is the same as it was last year. However:
child care centers—which account for most of the growth in the state’s child care capacity—are more likely to agree. In 2024, 64 percent of centers said the industry is in crisis. This year, that share increased to 87 percent.
As the Fed explains:
In past surveys, centers were less likely to report financial and operational challenges compared with family providers. The 2025 survey found that gap has narrowed. Many family providers still struggle, but the share that struggles is not much larger than in the 2024 survey. On the other hand, significantly more centers struggle now than they did before. By some measures, times are harder for centers than for family providers.
Compared with a year ago, the share of centers reporting decreasing financial stability increased 13 percentage points, to 35 percent. Family providers reporting decreasing stability was slightly lower, at 29 percent.
How legislators can help
Childcare providers face numerous challenges, some of them, like rising expenses, are inherent to childcare.
Most Minnesota centers and other child care providers now receive some form of state aid. But the survey found they still struggle with staffing, rising expenses, and competition with school-based programs. It doesn’t help that liability insurance availability and costs have recently emerged as new challenges
Some issues, however, like staffing shortages and competition with school-based programs, are government-created. Legislators can fix them.
Minnesota statutes require would-be childcare teachers and assistant teachers to, among other things:
- Take numerous post-secondary courses
- Acquire thousands of hours of work experience
These requirements narrow the pool of available qualified workers willing to work in the childcare industry, leading to staffing shortages.
Universal pre-K is hurting private providers
Infants and other younger children, like toddlers, are generally more expensive to care for compared to older children. Providers tend to use profits they make from older children to subsidize the cost of care for younger children.
The growth in public Pre-K programs has disrupted this model by taking away older children from the private market, leaving more expensive younger children for providers.
How reform can help
Lawmakers could loosen hiring requirements for licensed day care center teachers and assistant teachers. This would expand the pool of qualified workers willing to work in daycare centers, reducing staffing shortages.
Scaling down public Pre-K programs, especially in the wake of the $6 billion deficit, could save money and sustain a workable model for private childcare providers, especially if paired with regulatory reform.