Spending the budget surplus on childcare is a bad idea

Since the Minnesota Management and Budget announced that Minnesota is expecting a $7.7 billion surplus, numerous spending proposals have come out. And among the top spending priorities for Democrats and Gov. Tim Walz is boosting the state’s spending on childcare.

Certainly, Minnesotan parents are burdened with some of the highest childcare costs in the nation. Not to mention that the pandemic has worsened the crisis by driving some providers out of the market.

But the fact of the matter is that increasing spending on childcare assistance is unlikely to make a dent in alleviating the childcare crisis. This is mainly because childcare providers are burdened with restrictive regulations that have no impact on quality, but increase the cost of providing care and push small providers out of the market.

To be a teacher at a licensed center, for example, Minnesota requires that someone with a high school diploma possess 4,000 hours of experience as an assistant teacher. But to be an assistant teacher, someone with a high school diploma must possess more than two thousand hours of experience as an aide or student intern. Even someone with a bachelor’s degree is required to undertake over a thousand hours of training as an assistant teacher before becoming a teacher.

These stringent requirements raise the cost of obtaining qualifications for childcare workers, and they are a big reason why providers lose workers to other, similar-paying jobs that often have lower requirements. Not to mention that providers must often raise wages to attract qualified workers, which leads to higher tuition for parents.

The same is true when it comes to staff-child ratios. Minnesota laws require that licensed centers have one worker for every four infants –– an infant is defined as any child under 16 months. Other states, however, cut off infants at 12 months, thereby allowing allow kids older than 12 months to have higher child-staff ratios as well as higher maximum groups. Lower staff-child ratios raise the cost of providing care leading to high tuition.

The idea that stringent requirements raise the cost of childcare is supported by research evidence. A study published by the Mercatus Center, for example, found that reducing staff-child ratios would reduce the costs of providing infant care “by between $850 to $1,890 per child across all states to $1,890 per child in most states.”

So, if lawmakers want to reduce the cost of childcare and improve availability, they should consider loosening childcare regulations like staff-child ratios, hiring requirements, and training requirements, among others.

Subsidy programs often involve complex application processes, with a lot of paperwork requirements. Subsidies also usually require providers to meet some quality metrics through training or the use of a verified curriculum. These are requirements that most small and independent providers cannot meet, so they rarely benefit from subsidy programs.

Furthermore, many low-income Minnesotans, especially those in Greater Minnesota, are stuck in childcare deserts. Increasing spending on subsidies would not help them access care, since what they lack is supply.

Only measures aimed at increasing supply, and not increasing spending, would go a long way in alleviating high costs and childcare scarcity.