COVID-19 Impacts Different Child Care Settings Differently and More Assistance is Needed

by Rachel Perkins, ICS Policy Research Intern

COVID-19 blog series

The COVID-19 pandemic has upended all aspects of everyday life – with increases in working from home, financial strain, and general anxieties about exposure – the child care sector has been no exception.

Although often overlooked, the child care sector, a $99 billion industry nationwide, represents an integral part of the United States economy. Not only do child care programs foster well-being and development for young children, but also enable parents to maintain their work schedules.

However, for all it is worth, the child care sector has long been denied the level of public investment necessary to ensure the continuance of a thriving, high-quality industry. Enter in the COVID-19 pandemic, and many child care programs have been faced with impossible decisions between health, safety, quality, and financial stability. According to the November survey from the National Association for the Education of Young Children (NAEYC), 73 percent of providers are incurring substantial additional costs related to staffing and Personal Protective Equipment (PPE); 91 percent report additional costs for cleaning supplies. Already operating on thin margins, many child care centers do not have much of a cushion to absorb such additional costs – this, on top of enrollment reportedly being down to 68 percent of what it was prior to the outbreak of COVID-19, creates a dire economic hardship for the industry. As a result, about one quarter of child care centers, and one-third of family child care providers, fear they will close within three months if these trends continue, without additional public assistance.

In a fall survey of child care providers in South Carolina, ICS obtained the following results, as reported by child care centers open in the state:

In acknowledging that all the centers were open, it is perhaps more important to identify the types of centers that were more likely to close and why:

Child care providers in South Carolina were asked to rate their level of concern (on a scale of 1 to 10) towards a myriad of challenges presented by the COVID-19 pandemic: ‘Staff Safety,’ ‘Well-Being of Enrolled Family,’ and ‘Financial Stability.’

For all Group and Family Child Care Homes, ‘Staff Safety,’ ‘Well-Being of Enrolled Family,’ and ‘Financial Stability’ caused similarly high levels of concern across the board. Group and Family Child Care Homes are all small providers, often solo or perhaps utilizing one assistant, and usually run out of the provider’s house. One must not fail to recognize the human level of complexity that accessibility to quality, reliable child care presents when what is being offered is done so out of someone’s personal living space.

Conversely, although Licensed/Approved Child Care, Head Start, and 4K Centers reported moderate levels of concern for ‘Staff Safety,’ Head Start Centers and 4K Centers reported little to no stress regarding ‘Financial Stability.’ It is important to note that Head Start and 4K Centers are both recipients of the strongest government support (federal and/or state), thus their funding agencies have kept the funding stable throughout the course of the COVID-19 pandemic.

Despite high levels of concern expressed by Group and Family Child Care Homes, nationally these are not the centers receiving federal financial assistance. A NAEYC report released on April 17 found that of their 5,000 respondents, 53 percent of Licensed/Approved Child Care Centers versus 25 percent of Family Child Care Homes had applied for Paycheck Protection Program (PPP) loans. Their fall follow-up reported that about one-quarter of respondents who had received this funding had also paid for program supplies on their personal credit cards or bank accounts, suggesting that the PPP funding amounts, intended to cover 12 weeks of closure, cannot sustain programs for the duration of this health crisis.

Make no mistake: PPP loans have offered some child care providers critical time with which to pay themselves, their employees, and their fixed operating costs; however, entire segments of the child care industry (i.e., Family Child Care Homes) have largely been unable to access the program and its benefits.

In identifying the limitations keeping Family Child Care Home providers from applying, many were hesitant in taking on debt during this uncertain future. Additionally, per NAEYC, of those that did apply for PPP loans, 12 percent were denied – of which 55 percent were Family Child Care Homes. Explanations surrounding a lack of funding, credit scores, and/or business checking accounts (even if they had a personal account – neither of which was required to apply) were offered. Therefore, more straight-forward guidance from the banking industry is necessary in clarifying expectations regarding loans and forgiveness requirements, in addition to more substantial, direct investments from the government in this mixed-delivery child care system.

Financial concerns aside, the reported enrollment rates across the different child care settings in South Carolina continue to reflect an on-going demand by working parents for child care:

Providers face a bind: 86 percent of respondents to the July NAEYC survey note that although their families are asking them to open, simultaneously 72 percent of families do not yet feel comfortable sending their kids to child care centers. Despite the on-going demand for child care, the Department of Labor reports an estimated 325,000 child care workers have lost their jobs since February, prompting a challenge for the industry that is two-fold: 1) overcoming staffing inconsistencies and shortages; 2) continuing to provide quality relationship building while managing health and safety guidelines. Staffing was identified as a major challenge for South Carolina providers in ICS’s most recent survey as well.

Regardless, the results from the ICS survey in South Carolina and the NAEYC surveys present a daunting challenge for the industry: while child care providers are doing everything they can to stay afloat, some even sacrificing their own income and/or savings, additional financial assistance is necessary to ensure the nation’s economy does not suffer additional consequences when American parents return to work and cannot access quality, reliable child care. Financial support from the federal government has the ability to stabilize the child care sector, enabling programs to reopen and/or stay open safely over time.