Business model

The challenging business model of child care providers

SIOUX FALLS, SD (KELO) — Kayla Klein recalls paying child care staff $7.25 an hour.

After graduating from college in 2010, Klein served as executive director of Northern Hills Alliance for Children, a nonprofit daycare center in Deadwood.

“I was constantly frustrated,” Klein said. “I was embarrassed by the amount I was paying my staff. It wasn’t even a living wage. My parents (of children in care) could not afford the cost of care. The amount we brought from parents was not enough to cover the cost of our staff salaries.

That’s why Klein signed up to become a registered lobbyist to advocate for child care providers across the state. As a lobbyist for the South Dakota Association for the Education of Young Children and Early Learners, SD Klein wants to participate in more child care discussions, including how the $100 million US bailout should be used to help child care providers in South Dakota.

“We’ve never had a lobbyist who represents young learners in South Dakota,” Klein said.

The child care crisis in South Dakota has become well documented. In September, a study commissioned by the Sioux Falls Childcare Collaborative and produced as a report by Beacom Research Fellows of the Augustana Research Institute concluded, “to fill this gap in the child care system of children, parents and providers need more financial support.

Gov. Kristi Noem (RS.D.) highlighted the $100 million for child care in her December budget speech, but those involved in the industry explained that the influx of federal money punctual would not be enough to repair the defective system. .

Klein said she talked about child care options for banks, mining companies and economic development offices that pay child care bills to keep employees working.

“The business realm understands that this is not a normal, typical business,” Klein said.

“You put these expenses on the backs of the parents. Almost every other state provides support other than South Dakota. »

Klein said with the system currently in place in South Dakota, the only way child care providers will make a profit is to take children ages 3 to 5 just because you may have a higher ratio.

“Infants and toddlers are just more expensive to maintain,” Klein said. “But they need care as much as preschoolers. You can make “the profit” on the preschoolers because you can have a higher ratio, which means you have more income. »

That’s why, Klein said, if the state ends up helping to support child care, it would be important to ensure that the funding comes from a mixed delivery system.

“There are a lot of legislators who are really supportive and they know child care is an issue and they want to help,” Klein said. “But there are some who don’t quite understand and maybe they unfortunately don’t want to hear the truth.”

Senator Jessica Castleberry (R-Rapid City) owns Little Nest Preschool and Little Nest Day Care. She said she believes childcare can be a profitable business and there are ways to make it more profitable.

“One of the biggest issues we’ve had is with receiving payments and one of the pain points is with the child care assistance program,” Castleberry said. “What would be really beneficial is if the child care assistance program were more streamlined so that approvals happen more quickly.”

Castleberry said many families, especially those most in need and on the lowest incomes, rely on child care assistance that is run by the state but uses federal funding. She said these payment processes are delayed an average of four weeks.

Licensed and unlicensed child care providers

Part of the delay in distributing federal funds to child care providers is due to lawmakers’ concerns about the money going only to registered and licensed child care providers.

The Department of Social Services is responsible for rolling out the $100 million in federal child care-specific aid, but local lawmakers would like unlicensed child care centers to receive some of the aid as well.

The DSS said the state has about 800 registered daycares, broken down into 372 family daycares, 227 daycares, 145 before and after school centers, 40 informal home providers and 87 close providers.

Data from Early Learner South Dakota shows that the total number of estimated providers decreased by 16%, including a 30% drop in registered providers from 2012 to 2018. All this while capacity remained at around 30,000 slots.

Castleberry and Klein said people in the industry are trying to track unregistered child care.

Klein said more child care providers should be registered with the state because it makes them eligible for more financial assistance and resources.

“It’s a very simple process,” Klein said. “I think sometimes the process can be daunting, but now we see the incentives.”

A 2019 study suggested there may be as many as 2,000 unlicensed and unregistered child care centers in South Dakota. This is because the state allows a home child care provider to have up to 12 children without registering with the state.

Castleberry said registered child care centers meet a basic level of quality and safety.

“Anything over 12 children must enter this permit area. It’s a little harder to get, but there are resources to help with that as well,” Castleberry said.

Castleberry said lawmakers should make some of the federal money available to unregistered child care centers as long as they are registered.

“Let’s take another look at systems and processes specific to child care,” Castleberry said. “Streamlining systems and reviewing ratios could be beneficial.”

Klein said child care advocates must work to strengthen incentives for child care providers to register with the state. She said getting better child care data across the state should be a priority to help address the issues.

“People want this information, but we just don’t collect the data,” Klein said.

South Dakota is home to the highest labor force participation rate and is home to families who choose to have children in some kind of daycare.

On Tuesday, South Dakota’s education secretary told lawmakers that a statewide study of preschool gaps was planned for South Dakota. Klein, the idea of ​​universal preschool sounds too much like a mandate, and Early Learners South Dakota does not support mandates.

“It’s the freedom of choice for parents and their access to early learning or child care for anyone who wants it,” Klein said. “That’s what we want to see happen.”

Klein said she would like to see more public, well-marketed announcements at meetings regarding child care comments. She pointed out that lawmakers need to know more about child care providers and that she would like to see more applications.

“It’s not a normal business model,” Klein said of running a daycare. “The income comes only from the parents and you will evaluate it completely.”