About the author
Yvonne Thompson-Friend is executive director of Childspace Cooperative Development Inc. and a parent of a Philadelphia public school student.
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Financing quality child care is a challenge in fee-for-service system
by Yvonne Thompson-Friend
Every day, 400,000 Pennsylvania children, including more than 50,000 children in Philadelphia, go to some form of child care while their parents work or are in school. In Philadelphia, more than 35,000 of these children come from low-income families.
While there are government child care subsidies and free programs like Head Start, child care in the United States is mostly paid for through a fee-for-service system. Parents, as consumers, purchase care for their children and pay the bulk of the costs. According to a recent analysis by the Pew Charitable Trusts, 60 percent of child care costs nationally are paid for by families, with government paying 39 percent and the private sector less than 1 percent.
Child care is very expensive for most families, and Pennsylvania ranks high in child care costs. Child care for two children costs more than tuition at Penn State-Abington. Next to housing, child care can be the second largest expense for low-income families.
To help parents pay the high cost of child care, Pennsylvania, through the Child Care Works program (CCW), offers subsidies to low-income parents who are working or in education or training programs, preparing for employment. However, the program serves only a fraction of the eligible families, and the amount of the state subsidy, called the “reimbursement rate,” is too low to cover the full cost of providing quality child care.
Governor Ed Rendell’s 2006-07 budget does include $616.4 million for CCW, an increase of $53 million from last year, permitting an expansion of services.
But state funding is just one piece of the child care funding puzzle. Three-fourths of Pennsylvania’s child care budget comes from federal dollars, which have been frozen at 2001 levels despite rising costs.
In addition, the Center on Budget & Policy Priorities reports that the federal budget calls for cuts in discretionary child care funding for children from low-and moderate-income families totaling $1 billion over the next five years. Their analysis of data from the President’s budget shows that nationally, the number of children receiving child care assistance would drop by more than 400,000 over the next five years.
The projected decrease in federal dollars will have a huge impact on providers’ ability to operate quality programs and to serve low- to moderate-income families. State reimbursement rates to providers do not cover the true cost of care, and so child care programs must make up the shortfall in their reimbursement rate or operate without resources necessary to do the job.
Susan Kavchok, Financial Director for the Childspace Management Group for 14 years, explains some of the funding difficulties faced by providers: “The cost of health insurance has increased by 10-25 percent each year, commercial insurance premiums skyrocketed several years ago by almost 30 percent, and general operating costs have increased 25 percent.”
The result is that operating a quality program that serves predominantly low-income families is almost impossible. Only 4 percent of Philadelphia’s early education programs have met the highest quality standard, accreditation by the National Association for the Education of Young Children (NAEYC).
Portia Lewis, director of C. Rivs Precious Children, manages to operate one such center in Germantown.
“Quality is hard to maintain if you don’t have the funds to hire or train quality staff. It costs to send teachers to workshops and classes,” Lewis notes. Costs for training include bringing in substitute teachers.
Perhaps the greatest impact of the funding shortfall is on teacher quality. According to the Bureau of Labor Statistics, in 2003, an average salary for early education teachers in Pennsylvania was $13,334.
The Keystone Research Center compared the wages of child care staff to other Pennsylvania workers and found that child care teachers earn half as much as other Pennsylvania workers with the same level of education. Wages in many cases are below the poverty rate. Difficulty retaining teachers is one result. The Center found annual turnover rates range from 50 percent for aides, to about 30 percent for teachers, to 14 percent for directors.
High turnover is a major problem given that the research is clear that consistency of care is a major success indicator for early education.
Program directors find that wages and fringe benefits for early education teachers working in quality programs can eat up approximately 85 percent of the total budget.
While Pennsylvania has been increasing its contribution to child care funding, the system’s continued heavy reliance on paying customers stands in sharp contrast to the models employed by many other nations. Even within the United States, other states and municipalities have figured out better ways to handle the funding crisis and its inevitable impact on staffing and center quality.