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Childcare is a financially fragile industry. This is why with the coronavirus pandemic it has been one of the most heavily affected industries. When shut down orders were instated, parents pulled their kids out of childcare because they did not need the services anymore. Other parents pulled their kids out of childcare because of the fear of infection. It is quite surprising that we have not seen widespread closures of childcare providers.
However, the fact that we have not seen widespread closures of childcare providers in Minnesota is not a miracle. Providers have faced a great deal of financial difficulty during the pandemic. Low student attendance levels with increasing costs of operations threatened to drive a lot of providers out of the market. But the government handouts helped them stay in business. But before the handouts, some dug into their savings and cut their pay in order to be able to take care of childcare.
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 close 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 that providers were distressed, 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 childcare industry still faces issues. Providers still face low attendance levels. This is especially an issue for family providers who already serve a very restricted number of students and often make low levels of income. All of this has been impounded on the already existent issues that providers face like too much regulation.
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 supply of childcare, which was already an issue, is going to be made worse as we come out of the coronavirus pandemic.