COVID-19 blog series By Megan Carolan, Director of Policy Research; Alexis Herschkowitsch, Innovation Associate; Rachel…
As many states begin their individual “reopening” processes, the need has never been more clear for stable, quality child care. However, the economic impacts of COVID-19 have severely strained the child care sector in South Carolina and across the country, leaving many centers unsure if they still have access to care and leaving many providers unsure of their future.
In our report released last month, ICS surveyed 98 child care providers across South Carolina and found a number of concerns for this sector:
- One-third of centers reported they cannot financially weather a closure of any length of time. Another one-third of centers were unsure how long they could weather a closure.
- Nearly half (48 percent) of centers had closed as a result of the crisis; it is unclear how many will remain closed permanently as a result.
- The average current and projected short-term losses are greater than $50,000 per provider.
South Carolina is, of course, not alone in handling the unprecedented challenges to child care that the pandemic and economic crisis have triggered. The National Association for the Education of Young Children (NAEYC) found that about half of child care providers nationwide were closed by April; among those that remained open, 85 percent were operating at half-capacity or less. A financial analysis from the National Women’s Law Center (NWLC) and CLASP suggests that, nationwide, the sector needs an additional $9.6 billion, per month, in addition to current federal spending to sustain centers which have either closed completely, or to cover the costs of providing child care to the 6 million essential workers.
In our survey of South Carolina providers, we heard frustration regarding a lack of access to federal government relief funds. A common problem was obtaining relief from particularly the Paycheck Protection Program (PPP) which is intended to support payroll for struggling small businesses. The problems the PPP experienced in its first round are well-documented, and providers reflected many of the most common frustrations. Many providers reported they had responded immediately with applications for payroll support but have been unable to have their applications confirmed by financial institutions or to access customer support to navigate the process. One provider had heard from colleagues about the knowledge barrier in quickly applying for these “first come, first served” funds which quickly disappeared: “Those who are closed are so stressed, and many were not able to jump on the PPP grant the government offered because they did not have a savvy business person to help them with it or the knowledge of how to do it themselves.”
NAEYC found in a follow-up survey that many child care centers faced similar challenges. About half of child care centers they surveyed applied for the PPP; half of those applicants reported receiving the funds. A full third reported not having heard back about their application. About 12 percent were denied outright, with common explanations including “problems with their credit scores and their lack of a business checking account (even if they had a personal account)—neither of which are required by the SBA to qualify for the loans.” The PPP was administered by individual financial institutions who met certain credentials, not through a central SBA portal – however, this allows for financial institutions to set additional requirements beyond the terms of the PPP program to determine which candidates they would accept.
Many organizations – child care providers and others – reported “shopping around” for lenders, as many were only taking customers with whom they had a previous business relationship. However, NAEYC found:
“Rates of approval were slightly higher for borrowers who were previous clients of their lender (57% approval rate for previous clients vs. 49% approval rate for applicants who were not). For family child care homes, approval rates were lower regardless of previous client status; if they were clients, they confronted a 27% approval rate, while those who were not previous clients saw a 23% approval rate.”
These results suggest that family child care homes, the very definition of a “small business,” may have faced barriers to access which prevented them from access to these vital funds due to the information needed; the criteria used by banks; or through fears of how their personal finances may be impacted.
Funds through the PPP are available for applications filed by June 30. To learn more about the process and find a lender, visit these SBA resources. NAEYC has also created a guide for child care providers navigating the application process, and ICS has a recorded webinar guiding organizations as well.
The PPP is not a perfect solution for the crisis in the child care sector. About 40 percent of NAEYC respondents reported the PPP funds they received were less than $50,000, which is roughly the average financial loss ICS found over the first two months of this crisis. Even as centers reopen, it is far from “business as usual” as centers reduce group size – and, thus, receive less in tuition payments – to follow best practices from a health perspective. Many centers face an uncertain financial future and will need additional resources to rebuild (some of which may come through other sources, such as the Governor’s Emergency Education Relief (GEER) Fund to be administered by each state.
In our survey, providers did not shy away from their frustrations with the lack of priority given to child care providers. One shared:
“I understand the bigger small businesses are more of our country’s money makers for the economy but without us to provide child daycares, those businesses would not have workers able to work because of not having childcare/daycares. Daycare workers are very essential for parents and businesses. I’m not sure we are recognized as that which makes us the last to be considered for any type grants, loans or assistance and to me that’s unfair. We make it possible for businesses to make money by keeping their employees working and in my opinion that should be recognized and helped.”
ICS is hosting a webinar on the findings of our SC child care report on Thursday June 18 at 2:00 pm – register to join.