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Minnesota child care finances stabilize, but business remains in flux
A new statewide survey shows that fewer child care operators struggled financially last year in Minnesota, but changes to the child care business model and sharply rising costs still pose problems.
O survey of more than 1,200 child care providers found many optimistic about rising enrollments and more confident than they were in 2022 that they will be able to sustain their businesses.
“We are definitely moving beyond pandemic conditions,” said Suzanne Pearl, director of First Children’s Finance Minnesota, a nonprofit that conducted the research along with the Federal Reserve Bank of Minneapolis.
Many child care providers in Minnesota believe their industry remains in a financial crisis, even though state aid has helped stabilize conditions.
Federal Reserve Bank of Minneapolis, March 2024 First Children’s Finance survey
“There has been a lot of turnover, a lot of hardship in the child care industry during 2020, 21 and even 2022,” she added. “We are starting to see things stabilize.”
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Carried out in March, the research found that the state government’s large funding commitment last year helped boost the childcare sector. Lawmakers supported a record US$300 million to make child care more affordable, including subsidies for families and providers who helped keep doors open when COVID 19 era federal aid expired.
Despite this, some operators continue to struggle with the expense and demands of managing childcare.
Rising costs continue to be a major concern for Minnesota child care providers.
Federal Reserve Bank of Minneapolis, March 2024 First Children’s Finance survey
“Every year, I am saddened to see that about 20 percent of family child care providers use high-interest financing to get their business going,” said Pearl, whose group helps child care operations that serve low-income families. and moderate. “They are putting their expenses on a credit card. They may be using a payday loan.
The survey found that more than half of family child care providers and about 25 percent of child care center owners reported that losses in their businesses hurt family income.
‘You can’t compete with that’
Although business expenses have not increased as much as in previous years, they continue to rise, especially food costs for in-home child care providers. This sometimes causes tuition fees to increase, negatively affecting accessibility for families.
Monique Stumon, director of the School Readiness Learning Academy in Minneapolis, said she was able to use state aid to increase her staff’s salaries, but that the overall increase in expenses forced her to make difficult decisions.
“Everything is more expensive now, Stumon said. “We had to cut our scholarships that we gave to people because private donations decreased. So the grant funding we had before was not available like it had been in previous years.”
The survey also revealed that operators struggle with the ever-changing business model of child care.
Minnesota has had success with its investments in state funding of preschool programs such as Head Start, Early Head Start and an expansion of voluntary preschool program that offers free preschool through public school systems.
However, the survey revealed that private childcare companies, whether home-based or centre-based, face difficulties when the most profitable age group in the childcare market – children aged between 3 and 5 – moves to public child care.
Amanda Schillinger, director of the Pumpkin Patch Learning Center and Daycare Center in Burnsville for more than 20 years, says it’s difficult to compete with free or reduced-cost school programs funded with public dollars.
Kyra Miles | MPR News
“We have seen some declines in preschool and school-aged children,” said Amanda Schillinger, director of the Pumpkin Patch Learning Center and Daycare Center in Burnsville, noting the increase in free or reduced-cost school programs for children funded by public dollars. .
“We can’t compete with that, no matter how hard we try to keep prices low. You can’t compete with that,” she added. “They simply have access to financing that we don’t.”
It’s a dilemma that the state has yet to resolve.
“This is something we will be watching over the next few years,” Pearl said. “So what is the impact on local child care programs that may have served these same children but are now switching to another type of birth? Or a different type of child care? And so what does that mean for the market that’s available to these other companies?”