Some childcare providers have survived the pandemic by paying to take care of children

The service industry, and more specifically the childcare industry, is financially fragile. This is why due to the coronavirus pandemic-induced shutdowns, the industry has been one of the most heavily affected. In fact, the fact that there hasn’t been a widespread closure of childcare providers is mainly due to two things — government handouts and other extreme measures such as providers dipping into savings.

With childcare providers facing a great deal of financial difficulty, especially with low enrollment, government handouts helped them stay in business. But in addition to handouts, some have dug into their savings and cut their pay in order to be able to take care of childcare. Essentially, government shutdowns have forced childcare providers to pay in order to take care of children.

Government handouts

In the early days of the pandemic, Governor Walz asked childcare providers to stay open in order to provide care to children whose parents provide essential services. But from early on there were signs that without financial assistance most providers would stay closed permanently due to financial struggles.

The Legislature responded in late March by approving three rounds of payments, dubbed “peacetime emergency grants,” for child care providers. The state offered $29.6 million from its funds for the grant program and tacked on another $10 million from the federal government.

Child Care Aware of Minnesota, a nonprofit that administered the grant program, received 14,143 applications over the three grant rounds and money was sent to 5,398 programs. Of those, 704 programs received money three times. The minimum grant award is $4,500 per month, but they can range as high as $21,000 for larger child care centers.

Minnesota also tapped more federal aid to benefit the industry. In June, state lawmakers voted to use $21 million from its slice of the federal CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) for a one-time increase to reimbursement rates for providers that serve children of low-income families using the Child Care Assistance Program. The state had been long out of compliance with federal reimbursement requirements for the subsidy.

On July 7, Walz announced he would direct another $56.6 million from the CARES Act to child care providers. In contrast with the more competitive grant program, which favored child care businesses that served children of essential workers, the new cash is available to all providers who meet certain eligibility requirements. Providers must be open and serving children as of June 15, for instance. The first monthly payments from that cash are now being distributed, and two more payments will be made, according to the state Department of Human Services.

Providers also dug into their own pockets

But for the most part, providers were distressed and most of them dug into their savings to pay for the cost of providing care. Other providers cut their own salaries in order to afford more staff as well as more cleaning supplies. Providers were in a way paying in order to take care of children just so they wouldn’t have to close. Here is one good story that illustrates the plight of providers.

Lynn Barten has been a family child care provider for 22 years, a mainstay in an industry that has a shrinking workforce.

Barten first ran the business out of her Alexandria home, but then bought a second house to have more space for the operation. She has earned child care credentials, an associates degree, and is a state-approved instructor for other providers.

Yet the COVID-19 pandemic nearly forced her to close permanently. When parents began keeping their kids at home, the lost tuition — along with the increased costs of buying outbreak essentials like cleaning supplies — forced Barten to dip into her savings. She went months without a salary until she qualified for a state grant. “I was very close to leaving the profession, I really was,” Barten said in an interview last week as children played with bubbles and picked tomatoes in her leafy backyard.

The Industry still faces issues

Despite the extreme measures taken by providers, the childcare industry is still not out of the woods yet. For one, the industry still faces low attendance levels. This is especially an issue for family providers who already serve a restricted number of students and often make low levels of income. But even worse, all of this has only impounded on already existent issues that providers face, like overregulation.

Before the coronavirus pandemic, overregulation was one of the issues causing providers to exit the market. This issue has not been solved, and providers still face the same restrictive rules. In fact, restrictive regulation makes it even more likely that providers go out of business during the pandemic. This means that the shortage of childcare, which was already an issue, will be made worse as we come out of the coronavirus pandemic.