Child care industry says new state reimbursement rules will be devastating

Due to the pandemic, the industry is facing higher costs and lower enrollment.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

Child care providers say Pennsylvania’s new reimbursement rules scheduled to start in September will devastate the industry, forcing many to close and leaving parents without options as more go back to work.

Since mid-March, when most centers in the state ceased operations due to the coronavirus, the state has been reimbursing them in two of its key programs, Child Care Works and Early Learning Resource Centers, based on the number of children they had enrolled as of March 16.

On Friday, the Office of Child Development and Early Learning (OCDEL) announced that, beginning Sept. 1, it would revert to reimbursing the centers only for students actually enrolled. Most centers that have resumed operations have far fewer students than before but far higher costs due to new cleaning and sanitizing expenses and the need for extra space in order to meet social distancing requirements. This translates into more expenses and less revenue for an industry that has always operated on very tight margins.

And, because of COVID, enrollment patterns are likely to fluctuate dramatically in the near future, but centers cannot plan financially under those conditions, providers said.

Tana Rinehart, who runs the Warwick network of child care centers that has operated in Chester County for 33 years, said that even the most financially stable providers don’t know how they can stay open without further government aid and support.

“Financial predictability is crucial for our survival,” said Rinehart, who has worked in child care herself for 28 years. “I have never seen it this bad. I’m afraid a lot of us are not going to make it.”

Veronica Crisp, whose Step-by-Step Learning Center is in Delaware County, said the situation is “quite scary. I honestly don’t see how we will be able to sustain ourselves.”

The providers were also concerned about the state’s restoration of rules regarding absences. Subsidies stop if a child is absent for more than five days. But federal Centers for Disease Control and Prevention rules require a two-week quarantine for any child exposed to the virus.

In Pennsylvania, 169 providers have already announced that they are shutting permanently due to the impact of the pandemic on their finances. Many have laid off large chunks of their staff.

The state announcement noted that its payment policy during this period resulted in $370 million being sent to child care providers, most of which had remained closed. In addition, it distributed more than $100 million from the federal CARES Act funding in June and July and will hand out another $116 million more in August and September.

Most centers operate with a combination of state subsidies, a sliding scale of parent co-payments, and full tuition from families that can afford it. Even before the pandemic, providers have said that making ends meet while keeping quality high has always been a balancing act. For instance, child care workers are paid salaries that sometimes make it more lucrative for them to take jobs at places like Walmart and Target.

The child care centers’ dilemma is being complicated by the possibility of having to make space for older students, who will be in virtual classes at least three days a week. Centers get less reimbursement for those students than they do for infants, toddlers, and pre-kindergarten students. And adding older children also adds expenses, including appropriately sized furniture.

Another issue: The centers will be expected to help those students get online for virtual instruction, but some don’t have internet access or the appropriate bandwidth to support that.

“People are looking to child care centers to enroll school-age kids,” said Donna Cooper, executive director of Public Citizens for Children & Youth, an advocacy group. “That is a giant shift for them. They’ll be expected to get ready for school-aged kids with no idea if they are going to come. Add to that the unpredictable payments. … These centers are already barely above water.”

Cooper said that more state and federal aid is needed. PCCY and First Up, formerly the Delaware Association for the Education of Young Children (DVAEYC), organized a news media call Thursday for regional providers to explain their dilemma.

Cooper noted that the federal government decided to invest heavily in helping industries such as airlines and hospitals, where normal operations have been severely altered or curtailed as a result of the pandemic. The same must happen for child care, she said.

“Once there is a vaccine and people go back to work, these centers need to be there,” she said, a requirement to fully restarting the economy.

In Philadelphia, where most students are expected to attend schools two days a week, Superintendent William Hite said Thursday that there are plans to create makeshift centers for children in places like recreation centers, churches, and libraries for the three days a week that they will not be physically in school. Those spaces will supplement the amount of room that child care centers can provide.

Cooper said that is a good idea, and she said it is possible to maintain health guidelines in those circumstances, noting that camps have been doing that this summer.

There are ways to have the child care centers absorb the older children “without jeopardizing the viability of this sector over the long term,” she said.

State Sen. Tim Kearney, a Democrat from the 26th District in Delaware County, said that he and his colleagues are pushing for a special session of the General Assembly in August to deal with educational issues.

“We can’t talk about education without talking about child care,” he said. “This affects all of us, not just those with children who need care. It allows society to function.”

Kearney noted also that the state is “staring at a budget hole” that has deepened as the pandemic has wreaked havoc on tax collections.

“This is unprecedented. We’ve never been in a position like this,” he said. The state passed a budget that kept K-12 education funding whole for the entire fiscal year, but the rest of the budget only covers five months.

“Somehow, we are going to come back in November and figure out how to pay for the rest of it,” he said.

Up to now, he said, spending for child care in Harrisburg, unlike many other areas, has generally received bipartisan support.

Undermining the industry is “unwise,” he said. “If any industry needs stabilization to get society functioning again, it’s child care.”

Erin James, a spokesperson for the Pennsylvania Department of Human Services, while noting all the extra funding provided to child care centers through the CARES Act since mid-March, said that “reverting back to real-time attendance numbers will allow more families to receive the Child Care Works subsidy, and gain access to safe and stable child care.”

She also said that “while it is true that some child care providers have decided to permanently close, the vast majority have not.” Of roughly 7,000 licensed providers, 6,300 have reopened, 650 remain temporarily closed, and “approximately 165” since the end of February have permanently closed.

Penn State Harrisburg’s Institute of State and Regional Affairs is conducting “an impact study to understand the challenges for child care providers reopening and resuming operations during COVID-19, and this study will inform distribution of the final $116 million and other decisions moving forward,” James said in an emailed statement.

The Notebook’s coverage of early childhood education is funded by the William Penn Foundation.