Michigan child care providers struggle to stay afloat as fewer children show up and federal aid runs out

A 2-year-old and a 3-year-old wear masks while working on an activity at Crib 2 College Academy, a child care center in Detroit in the first week of August 2020. The center could close due to financial difficulties.
A 2-year-old and a 3-year-old work on an activity at Crib 2 College Academy, a child care center in Detroit, during the first week of August 2020. Owner Betty Favors said she is on the verge of closing her center for good: “The bills keep coming. We’re going day by day.” (Courtesy Betty Favors)

This spring, three adults linked to Little Scholars of Detroit Child Development Center died of COVID-19. One staff member lost her husband and her sister, and another lost her mother. Shirley Hailey, the center’s owner, was infected and nearly lost her husband, who was hospitalized for 23 days before recovering.

The next coronavirus pandemic victim might be Little Scholars itself.

Hailey reopened the center in June, determined to keep serving the community where she has worked as a child care provider for nearly 20 years. But just one-fifth of her usual 148 students came back, mostly the children of essential workers. Money from the federal coronavirus relief package helped, but those dollars are running out. Hailey says her business is near the breaking point.

“Two more payrolls after this one and we’re out of money,” she said this week. “I’m looking at 45 days.”

Many parents are keeping their young children at home, making it difficult for child care providers to make ends meet. There is no certainty of further federal aid and no sign that the state will step up to help child care centers survive. Michigan is at risk of losing 41% of its licensed child care slots, according to an April study by the Center for American Progress, a left-leaning think tank.

Hailey is a member of Providers for Change, a new group that’s pushing to save their centers by making significant changes to the state’s child care subsidy for low-income families. The subsidy is too small and unreliable to support providers through the pandemic, they argue. Many say they could be forced to close if nothing is done.

A rash of child care closures would be bad for children, for schools, and for the economy, especially in the state’s most vulnerable communities. Children rely on child care centers for food, socialization, and to prepare them for kindergarten. Without a safe place for children to go, it’s harder for parents to work and for teachers to teach. And closures mean more child care workers on the state unemployment rolls.

“There’s no economic recovery without child care, period,” said Dawne Bell, CEO of the Early Childhood Investment Corporation, a Lansing-based advocacy group.

The pandemic has exposed long-standing problems at every level of Michigan’s child care system. Costs can be prohibitive even for relatively well-off families. Detroit is already a massive child care desert, with 27,000 fewer slots than families need. Families living in poverty often can’t find subsidized care, and the subsidies are so small that early childhood teachers often live in poverty themselves.

“There are things we can do now” to help providers, said Sen. Winnie Brinks, a Democrat from Grand Rapids. “But I would say that we should have been doing most of those things before COVID hit. It just uncovered a lot of the challenges that made [the child care sector] really tough before.”

Helping child care providers stay afloat would require additional state spending, Brinks said. The state would essentially need to pay providers for empty seats, something it did for K-12 schools this spring but has never done for child care centers. But with Michigan facing a substantial budget deficit, Brinks said a major change to child care funding would be a “very, very heavy lift” politically unless Congress passes another federal aid package.

“Everyone right now is looking at the federal government,” said Bell.

Detroit centers, which often rely on a subsidy for low-income families, are at particular risk of shutting down.

The subsidy is tiny, one of the smallest in the nation, said Matt Gillard, director of the nonprofit advocacy group Michigan’s Children. Providers know that the parents they serve can’t pay more out of pocket. 

“The easiest fix is for the state to dramatically increase the reimbursement rates that we’re giving providers per child,” Gillard said. “The rates are still abysmally low.”

Many providers in low-income communities are used to surviving from payroll to payroll. But the pandemic is proving impossible to navigate, even for businesspeople used to scraping by.

“The math doesn’t add up,” said Candies Rogers, owner and director of CircleTime with Friends Learning Center in Redford, a Detroit suburb. “At this point we probably won’t make it to the end of the calendar year.”

Rogers is one of the providers pushing for changes to the state’s main subsidy program, Child Development and Care assistance. The program spent nearly $200 million in largely federal dollars in 2018-2019 and served about 34,000 kids, nearly as many as the Great Start Readiness Program, Michigan’s banner preschool program for low-income 4-year-olds.

Rogers brings in funds from both programs, but she says DHHS is the reason she might have to close. She only gets paid for the hours that subsidized students are present, which means that she’s in trouble if they don’t show up.

And they haven’t: On a typical pandemic day, Rogers cares for 16 children. Before the coronavirus, she was at capacity — 68 kids — with a waitlist.

For a few months this spring, the state used money from the federal coronavirus aid package to pay providers based on their pre-pandemic enrollments. But those payments stopped by mid-summer.

In order to meet state requirements for teacher-to-student ratios, Rogers needs to have six teachers on staff to care for the children, who include a 6-month-old, a 3-month-old, and two 2-year-olds. “I can’t pay more than two staff members comfortably,” she said.

Further complicating matters for providers who depend on these funds, the hourly rate makes it impossible for providers to know how much money they’ll bring in. If a child leaves early or just doesn’t show up, they lose income. Providers get to bill for some absent hours, but many have blown through them in recent weeks.

“You don’t know what you’re going to get,” said Toya Taylor, owner of Reign Development Center in Detroit, who says virtually all of her income comes from state subsidies for low-income parents. “Your payment is different every two weeks. And I still have … bills that need to be paid.”

The pandemic made the problem worse, Taylor said, by making it harder to predict whether students will show up. She’s also had to adopt a much stricter sick policy, and is now sending students home for the slightest sniffle.

“I’m definitely in a position where I could be forced to close,” she said.

Difficult financial conditions could put a serious dent in the state’s child care offerings. The Make a Difference Learning Center offered care for roughly 30 children on a typical day before the pandemic.

When owner Valerie Draper reopened in July, only two children showed up, so she closed it back down. 

“Staying open for a few kids to me is not worth it,” she said. “It doesn’t pay rent.”

Draper has been a child care provider for more than two decades in the suburbs along Detroit’s northeast border, which has one of the most severe child care shortages in the metro area. She says she’ll probably call it quits for good in September if demand doesn’t pick up when K-12 classes resume.

The pandemic, Draper said, has given new weight to something she has long sensed: that early educators aren’t valued by the state. She spent years working to comply with the stringent training and certification requirements imposed on child care providers, and now she feels abandoned.

“I’m devastated; I’m angry,” she said. The state “still treats us like babysitters. We’re not providers, we’re not professionals. They pay us babysitter rates.”

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