As pre-K booms, study finds infant and toddler care less lucrative

Fresh crayons and markers await students at SPIN-Parkwood preschool, which added two classes and 40 students because of Philadelphia's pre-K initiative. Jan. 4, 2017 (Emma Lee/WHYY)

Fresh crayons and markers await students at SPIN-Parkwood preschool, which added two classes and 40 students because of Philadelphia's pre-K initiative. Jan. 4, 2017 (Emma Lee/WHYY)

Early education centers in Pennsylvania struggle to balance their books and provide high-quality care. And those that serve the youngest students face the grimmest financial outlook.

So concludes a report released Monday by Research for Action, a nonprofit organization based in Philadelphia that conducts education research. RFA profiled six child care facilities across the state, providing an uncommonly detailed look into the daunting economics of early child care.

And the economics are indeed daunting, according to RFA.

Researchers found that for the average infant served, centers received 38 percent less money than needed to serve that child. For toddlers, revenues were 30 percent lower than costs.

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Pennsylvania provides a subsidy for infant and toddler care, but the reimbursement rate has been flat for 10 years. Providers told researchers subsidies weren’t nearly generous enough to maintain the low student-teacher ratios state law requires for infant and toddler care.

“I don’t know how anyone makes enough money on infants and toddlers to cover the cost of those ratios, especially for children on subsidy,” Sister Barbara Ann Boss of The Seton Center in Pittsburgh told researchers. “We do that as part of our mission.”

To make up the difference, centers raised money from outside sources or plugged the gap with money generated by serving pre-K students.

“To offset this high cost gap and make ends meet, providers often opt to serve more pre-K school children than infants and toddlers and maintain school age programs which may help subsidize the true cost of infant and toddler classrooms,” the report concluded.

The RFA report underscores just how funky the market is for child care providers.

Many families — especially those with young parents — can’t afford the true cost of quality, center-based care. That means many centers can’t raise rates on tuition-paying parents when times get lean. If they do, parents are liable to opt for informal childcare arrangements.

Government provides a web of subsidies to keep centers afloat and encourage workforce participation among parents. RFA’s report, however, indicates that those taxpayer contributions fall well short of what centers need to provide high-quality care and pay their workers a fair wage.

“It’s like a jigsaw puzzle they’re trying to figure out,” said Della Moran, one of the report’s co-authors.

Making that puzzle more difficult is the fact that many providers struggle to combine multiple forms of government funding because of the administrative burdens attached to each, RFA found.

For instance, Head Start funding from the federal government only covers costs for typical school day. Since many parents work longer than the school day lasts, centers have to provide extended care. That requires either charging parents for those extra hours — a non-starter for many families — or mixing in other government childcare subsidies.

That latter can be difficult, RFA found, because it requires fairly sophisticated reporting and tracking, which in turn requires centers hire extra staff to help keep track of all the money.

Open since 1976, Children’s Village in Chinatown is among the best at making this complicated scheme work.

The 475-student facility accepts four different kinds of government subsidies and offers services ranging from toddler care to after-school care for older children. About a fifth of Children’s Village budget comes from grants and other sources, by far the largest percentage of the centers highlighted in RFA’s report. The center even gets creative in its use of space, Rooms used during the day for younger children convert into aftercare spaces when older children return from school, meaning Children’s Village can enroll more children than its space would allow at a single point in time.

As a result, Children’s Village meets the highest state quality standards and pays its teachers between $32,000 and $40,000 a year, also the highest rate among centers profiled. Still, the pay at Children’s Village falls well short of what teachers make in the School District of Philadelphia.

RFA concluded Children’s Village would have to spend $64.55 per child per day to pay its workers a competitive wage and meet the teacher-student ratios recommended by a prominent, national early childhood evaluator. At present, the center spends $52.85 daily despite its many government subsidies and impressive fundraising efforts. Longtime center director Mary Graham said her organization would need another $1.3 million annually to meet the quality target set by RFA.

The gap between what Children’s Village spends and what it would ideally spend is actually relatively low. The Seton Center in Pittsburgh spent only about half of what it would need to reach RFA’s quality bar.

All this highlights what Graham said is an enduring problem for those in the early child care sector: quality doesn’t pay. Pennsylvania offers more money to centers it deems higher quality, but the subsidies don’t cover what centers actually have to invest to meet the state’s quality benchmarks, according to a 2015 study of Philadelphia child care facilities by the Nonprofit Finance Fund.

“There’s no incentive to become quality. And that’s the reality,” she said. “I don’t think providers get up in the morning and say, ‘I’m gonna be low quality.’ They wake up and say, ‘I’m gonna do the best I can with the resources.'”

Recently, government resources have been pouring into the pre-K sector. Pennsylvania Gov. Tom Wolf wants to budget another $75 million this year for government-funded pre-K for low-income children. Locally, Philadelphia Mayor Jim Kenney championed a sweetened-beverage tax to create the city’s first government-subsidized pre-K program.

Meanwhile, just one government subsidy for infant and toddler care remains, and it hasn’t budged in a decade. The waiting list for Child Care Works — which is also available to pre-K and school-aged kids — runs nearly 14,000 students long, according to RFA.

Given the scarcity of affordable, high-quality child care options, it’s tempting for policymakers to prioritize expansion over increasing reimbursement rates, Moran said.

“It’s a more popular choice for politicians to get more kids in,” she said.

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