Business/Economy

More grants coming to stabilize Alaska’s fragile child care system

Two years into the COVID-19 pandemic, parents across Alaska are still struggling with long wait lists, high costs and limited capacity at child care centers.

Child care is one of the greatest expenses for families, and also one of the most critical pieces of infrastructure for working parents. Even before the pandemic, spots were frequently limited and costly, but COVID-19 introduced a new layer of expense and logistical struggles for child care providers. When schools shut down or limited on-site instruction in 2020, more parents scrambled for day care, but at the same time, care centers had to cut their capacity to allow for social distancing, wrangle with masks and other personal protective equipment, and also monitor for symptoms.

What that meant was financial struggle for child care centers, which typically rely on child tuition to make ends meet. In the last year and a half, the state has been working with thread Alaska, the statewide child care resource and referral network, to distribute grants to help stabilize those centers and keep them from closing.

“Since the start of the pandemic, we have seen one-fifth (of licensed child care centers) close,” said Stephanie Berglund, the CEO of thread. “One of our goals is to not see any more permanently close.”

Using federal coronavirus relief funds, thread has been working with the Alaska Department of Health to give grants to existing child care agencies to help offset some of those costs. The funds have been split into three phases, with the first awarding about $4.5 million between September and December 2021 to 398 programs. Those funds were for short-term assistance to help centers remain open.

The second round of grants, with about $12.2 million distributed as of June 1, were primarily for stabilizing licensed programs. Another program between the two phases, funded by the Coronavirus Response and Relief Supplemental Act rather than the American Rescue Plan Act, distributed about $4.4 million targeted at retaining the workforce. Now, thread is getting ready to issue the third round, which aims to disburse approximately $23 million to help stabilize the child care provider market in the state.

Thread has defined stabilization as access to quality child care.

“What we mean by quality child care is child care licensed by the state,” Berglund said.

[With just weeks until classes resume, schools across Alaska are struggling to find teachers]

To keep track of that, thread is measuring success by factors including the number of licensed facilities and whether facilities are actually serving the number of children they are licensed for. While many providers have remained open, they’ve had to defer enrolling new students because of extreme staff shortages. While many child care centers are hiring, they are having to compete in an increasingly escalating market in which they can’t match the rising wages.

That’s one of the ironies of the child care market, Berglund said — there’s huge demand for workers and capacity, but because tuition is already so expensive, providers don’t have much room to raise it to pay workers more.

The child care shortage and high costs actually predate the pandemic, according to an April report from the Alaska Department of Labor and Workforce Development. However, the pandemic saw child care employment drop by about 12%, with average wages hovering around $12.88 per hour.

After workforce issues, affordability is the second biggest concern, she said. The average family spends about 17% of their annual income on child care, or about $13,775 per year. That works out to about $1,148 per month. While there are assistance programs through the state to help with cost, the families paying those fees are often at the early ends of their careers, when the burden is heavier.

“We have a mantra of saving for college,” Berglund said. “Nobody talks about saving for child care.”

While most of Alaska’s residents live in Anchorage, where there are a variety of child care options, there are few to no options in many of the smaller towns and villages across the state. The Department of Labor’s report estimates that about 61% of Alaskans lived in areas without reasonable access to child care in 2018.

Lack of child care translates directly to impacts on the economy, as parents without options have to take time off or drop out of the labor force. A U.S. Chamber of Commerce report from 2021 on Alaska’s child care shortage estimated that the loss in productivity cost the state’s economy about $165 million per year, with most of that related to absences and turnover.

“If a parent is absent, this presents a financial cost to both the employer and the parent,” the report states. “The parent may lose wages for time missed, and the employer experiences a loss in productivity as well as the financial cost of paying overtime to other workers or even hiring and paying temporary workers to make up for the missed work.”

Thread estimates that this round of funds targeting child care stabilization will likely be disbursed over the coming winter. This round is designed to give recipients flexibility on how they spend the money, with some limits, like on new construction. Berglund said the funds aren’t designed to be seed money for people to start new child care businesses, but thread has guidance and encourages people who can to start their own home-based day care businesses. Thread also supports opportunities for investing in child care as a public good, a key support for the economy, she said.

She particularly noted the need in midsize communities, where there is clearly need but capacity is strained. Responses to a survey from thread indicated that more than half of providers were concerned about having to close in the coming year.

“A lot of people have asked us how we’re measuring the fragility or the stabilization of child care now versus before COVID,” she said. “It was already in a difficult place before COVID … and we don’t have a good answer to that. We can just say it was already fragile. Our data is showing us it’s even more now.”

Reach Elizabeth Earl at elizabethearl@gmail.com.

Elizabeth Earl for Alaska Journal of Commerce

Elizabeth Earl is a freelance reporter based on the Kenai Peninsula. Reach her at elizabethearl@gmail.com.

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