Aid lets Iowa day cares hire more, but not pay more

DES MOINES — Iowa’s child care providers continue to tread financially troubled waters after being thrown a much-needed lifeline via federal COVID-19 relief funds.

Like all sectors of the economy, the child care industry was hard hit when coronavirus arrived in Iowa in March 2020. However, unlike some businesses and services, Iowa’s for-profit, nonprofit, group homes and others that take care of small children were allowed to continue as essential operations.

Various federal COVID-related relief and recovery funding streams have pumped more than $120 million into Iowa’s child care network. Rejuvenation grants help providers cover expenses and support qualifying low-income families with stipends and reduced co-pay requirements. That was separately supplemented by direct child care tax credits that temporarily provide monthly help of $300.

Ryan Page, team leader in the Iowa Department of Human Services’ child care bureau policy division, said state officials also have funneled federal money into some new or expanded programs effective July 1. Backers said those efforts were designed to increase the child care workforce, increase provider rates to maintain existing child care facilities, provide incentives to develop new child care facilities, and help working families cover child care costs. State officials also monitor best practices for the ratio of children per adults based on various ages and program types under the state’s purview. That’s an issue of concern particularly in rural areas that legislators addressed in part by allowing nonregistered child care homes to expand by one school-aged child — from five up to six slots.

“Child care is expensive to operate because when you have low ratios to promote not just health and safety but appropriate age and brain development, you’ve got to have those lower ratios to protect kids. So staffing is a huge cost issue,” Page said.

To that end, Sen. Janet Petersen, D-Des Moines, raised concern that Reynolds administration officials have decided not to use federal money to cover child care provider pay increases for existing staff at a time when the employee turnover rate is high. Iowa already lost more than 200 child care facilities over the past two years, and providers are struggling to attract workers in a tight labor market. She said the situation is perplexing because state government just reported a $1.24 billion budget surplus, and state officials have nearly $400 million in federal COVID-19 relief money for child care block grants that has been obligated but not expended.

“We’ve seen child care setting closures across our state because they’re unable to find workforce that are willing to work for such poverty wages,” Petersen said.

Backers say raising wages for child care workers would advance equity for women and increase their labor force participation, lift families out of poverty, boost the broader economy and improve outcomes for children.

While child care provider pay increases are an allowable expense under the federal CARES Act, DHS officials said the Investing in Iowa’s Child Care program was intended to help child care programs with up-front expenses needed to increase their capacity. Increasing wages for staff was not included due to concern the pay levels could not be sustained after one-time funding ended.

“It was recognized that increasing capacity requires new staff and that these staff would need to be hired before the children were enrolled and parents were paying tuition, therefore a formula accounting for three months of salary and First Aid/CPR costs was developed to support programs paying new staff until child tuition payments could take over that cost,” according to the department.

Page said Iowa has roughly 4,000 registered child care providers, with up to 2,500 of those being child development or registered home-based child care providers and another roughly 1,500 licensed child care centers.

“There’s always a constant ebb and flow that we experience with our child care programs,” she added, noting that since Jan. 1, 2020, Iowa lost less than 2 percent of licensed child care centers “so when we have some closings, we also have some other openings.”

The DHS official said her agency is awaiting recommendations from the Governor’s Child Care Task Force. Gov. Kim Reynolds created the task force by executive order and appointed members in March to develop a comprehensive strategy to address the child care shortage and barriers to work. The panel’s report will direct how the federal money available through fiscal 2024 will be used, including about $227 million in “stabilization” money to assist child care providers with their operating costs — of which about 80 percent is staffing. Officials with the state Department of Economic Development, which houses the task force, did not respond to requests for information about the task force deliberations.

Page answered some additional questions from The Gazette about the use of federal relief funds and the outlook for the child care industry in Iowa.

Q: When do you expect to release those additional federal relief funds?

A: “We’re anxiously awaiting the child care task force final report and their formal recommendations. That will help inform how we potentially use some of the other federal funding sources that we do have. Whether that’s for stimulus funding or whether that’s part of our annual allocation to our block grants. We’re just waiting to see what those recommendations are so we know where our community partners say they want us to be investing the money. With those stabilization grants, we will have an eligibility protocol for folks to apply for the funding, and those are the kinds of details that we still have to work out on how much programs can access.”

Q: Is there a Catch-22 here in that child care centers need workers to stay open, but funding can be used to hire new workers but not raise existing salaries with one-time money?

A: “We have to think about a number of things like sustainability. If we have a new policy, we need to look at it long term if this funding is not always going to be available. The volatility of the child care market — it costs a lot of money for families to access child care but then the wages of the child care employees don’t always match up to that. To raise wages, typically in a free market there’s supply and demand. It doesn’t really work like that with child care. Do I have concern about stabilization of the market pre- and post-COVID? I have a concern about it in general. I think that the market is complicated and without stabilized funding, then the infusion might be a short-term solution.

“Staffing is an issue, in Iowa and nationally and in multiple sectors, that is something we have not been able to fix. But I do believe that the money that we are putting into the system is helping to sustain our child care infrastructure. I do think it’s going to improve it in some ways, but the work is not done, and there are certainly areas of the system that are broken from a national perspective.”

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