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Published in Economic Development

$1.4B infusion for child care offers crucial short-term solution, advocates say

BY Sunday, October 10, 2021 04:45pm

The $1.4 billion injected into Michigan child care in the state’s newest budget is intended to bolster the industry at a time when most economic sectors are coping with a troubling labor shortage.

Support for child care using one-time federal pandemic relief funding includes higher pay and bonuses for workers, grants to stabilize day care operators hurt by the effects of the pandemic, support for the formation of new child care centers, and funding to expand capacity for infants and toddlers.

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As well, the budget altered the income threshold at which parents can receive a state subsidy to pay for child care from 150 to 185 percent of the federal poverty level, making an estimated 105,000 households eligible for assistance. The income threshold falls back to 160 percent of the federal poverty level in two years.

Child care operators and advocates praised the funding embedded in the state’s fiscal year budget that started Oct. 1 as giving the industry much-needed support after more than 1,400 home-based and child care centers closed since the start of the pandemic.

Between August and September, 80 child care providers across the state closed, eliminating 586 licensed spots, according to a monthly report from Great Start to Quality, an agency that helps to connect families with information on child care and preschools.

‘When we work, they work’

Through the state budget process, Gov. Gretchen Whitmer and legislators elevated child care’s status as an integral part of Michigan’s economy at a time when virtually every economic sector is experiencing a chronic staffing shortage, said Laurie Fletcher, who runs a home-based child care business in Grand Rapids.

“We’re the foundation of our economy. We understand that if we are in our workplace, then the workers can be in their workplace and when we work, they work,” Fletcher said. “When child care works, Michigan works.”

As the labor shortage limits potential economic growth, business groups urged legislators to use federal stimulus money to back initiatives supporting the child care industry. Many of the items included in the final budget deal negotiated with legislators originated from a task force that Whitmer assembled to examine child care in Michigan.

Child care was already in short supply before the pandemic, Fletcher said. The pandemic worsened the situation, as parents worked from home or left the workforce and disenrolled children, she said.

In a tight labor market, child care providers that operate on thin margins don’t have the financial ability to increase pay to compete for workers with other sectors, Fletcher said. Nor can providers simply pass the cost on to parents, many of whom are already struggling to afford tuition, Fletcher said.

Slim resources, high expectations

The state’s new fiscal year budget includes $700 million for stabilization grants over the next six months and $158 million for an ongoing 30-percent rate increase to providers who are caring for children of families eligible for state subsidies. Another $117.4 million will pay providers based on their enrollment rather than attendance, while $100 million is dedicated to business startup grants.

Meanwhile, $36.5 million will help expand the number of child care openings for infants and toddlers, and $30 million will go toward $1,000 bonuses for child care professionals.

The funding to support better compensation for child care workers can help to retain and bring more people into the industry, said Lindsey Potter, a child care consultant who’s working to open Bright Light Early Care and Education LLC in downtown Battle Creek late this year or in early 2022.

Potter, who’s vice president of the advocacy group Childcare Providers Association of Michigan that was formed in 2020, has also seen burnout rates rise at child care centers throughout the pandemic, and workers move on to higher paying jobs. The last six months “have been more difficult in maintaining a staff (and a) culture of positivity and engagement” as providers cope with staff burnout and the effects from the pandemic, she said.

Potter is hopeful that the budget funding can restore an industry “where resources are slim and expectations are high.”

“Hopefully, that short-term relief will be able to re-encourage and revitalize the staff and the families and their commitment to high quality child care,” Potter said. “Industry within Michigan doesn’t go well without child care functioning.”

Bipartisan support

As the governor and legislators worked on the budget throughout the summer, advocates successfully argued for financial support for the child care industry as critical to the state’s economy, said Alexa Kramer, director of government affairs for the Grand Rapids Area Chamber of Commerce. Kramer called the funding support “incredibly bipartisan.”

“For it to be able to be included in the overall budget conversation shows just how much of a priority this was for both the administration and the Legislature,” she said. “It’s also important from a day-to-day business perspective. Showing that we are putting our money where our mouth is when we say our child care industry is important is really critical for them to survive and thrive.”

By providing greater financial support for child care and creating more providers, the state can enable more people to return to the workforce, Kramer said.

As of August, Michigan’s civilian labor force of 4.8 million was still 105,000 people below a year earlier, according to the latest unemployment data from the state Department of Technology, Management and Budget.

“Seeing these dollars go particularly to helping providers is so impactful for the rest of the business community, and more and more folks see that, too. It only makes sense to have a strong economy that we have to have a strong child care industry,” Kramer said. “Our providers are small businesses and most often than not are women-owned and minority-owned. All that we can do to support them to be business owners and elevate them as a profession is going to be beneficial to everyone. It has such a ripple effect.”

Despite the funding in the state budget, Kramer and others say more needs to occur to shore up the child care industry. Bills under consideration in Lansing may bring some regulatory relief to highly regulated child care providers, she said.

Fletcher’s hopeful that the new state funding is “not just a one-time fix.” She would also like to see employers do more to support the child care that many of their employees need as part of a broader cultural change in how the industry is viewed.

“We know in the long term the Band-Aid is not the solution,” Fletcher said. “Until we do deal with that reality and understand this is something we have to make a choice to support and make positive progress on, we’re going to be stuck in this position indefinitely.”

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