Early Childhood

City-County Council begins debate about how to pay for preschool

PHOTO: Scott Elliott / Chalkbeat
Preschoolers at Shepherd Community Center.

Paying for a new city-sponsored preschool program could get tricky for the Indianapolis City-County Council.

Under a proposal the city could consider this week using about $2 million from a reserve fund for the first year. A plan has yet to be figured where the rest of the city’s share of $20 million over five years will come from.

The overall plan is to spend $40 million on preschool through a public-private partnership among the city, businesses and philanthropy groups to serve 1,000 poor children. It was passed the council by a wide margin in December after months debate leading to a compromise between council Democrats and Republican Mayor Greg Ballard.

Democrats blocked by Democrats blocked the plan initially objecting to Ballard’s plan to pay for the program by repealing the local homestead tax. Council Vice President John Barth will propose appropriating $4.2 million for the first year of the plan at a council committee meeting on Wednesday.

“We’re moving forward with what we what we agreed on,” Barth said.

A proposal submitted to the council outlines about $2 million annually is proposed to come from the city’s fiscal stability fund. Once used to shore up the city’s finances, council CFO Bart Brown said it was tapped into recently to fund the Indianapolis Metropolitan Police Department’s latest recruit class.

City officials also plan to use about $1.7 million that was saved through a change to the homestead tax credit program, and tap into the county’s general fund.

Deputy Mayor Jason Kloth said the mayor’s office worked with Democrats and Republicans to foster support for the plan.

“We’ve gone to immense lengths to forge bipartisan support for the sources of funding,” Kloth said.

Preschool advocates including Eli Lilly and Co., which rallied businesses in support of the plan last year, are hoping the debate over how to fund the plan passes the Council without any hiccups. Lilly Foundation President Rob Smith said businesses have raised $6.2 million to support the plan so far.

“I’m confident this will pass out of committee and pass the full council,” Smith said. “There will be questions and a good debate, but it will pass and we can begin to really ramp up the implementation of this program.”

But some council members from both parties have already warned they would be watching to see what sources the funds come from before they give their final support to the program.

“Not one cent of this money should come from (police),” Republican Councilman Aaron Freeman said back in December. “Not one cent should come from the public safety tax. I will be a ‘no’ vote at that point. We should find another mechanism to fund this outside of that.”

Paying for pre-K

To fund pre-K, advocates in Indiana pitch tax credit scholarships, ‘pay for success,’ tax hikes

PHOTO: Scott Elliott / Chalkbeat
Preschoolers at Shepherd Community Center.

Early childhood education advocates are suggesting new ways for the state to fund prekindergarten — by bringing in investments from local communities and corporations.

In a new report released Tuesday by the Indiana University Public Policy Institute and Early Learning Indiana, advocates recommended the state look into tax credit scholarships, social impact bonds, food and beverage tax revenues, or local referendums to pay for expanded pre-K access.

“I don’t think it should be shouldered just by the government or by the private sector alone,” said Madeleine Baker, CEO of the Early Childhood Alliance in Fort Wayne, who co-chaired the report’s advisory board. “I think there needs to be partnership across the board. Everybody has to have skin in the game.”

Tuesday’s report kicks off a renewed campaign to expand early childhood education in Indiana, which is shaping up to be a budget battle in the upcoming legislative session that starts in January.

It could be fairly easy for the state to launch tax credit scholarships for pre-K programs, since Indiana already spends $14.5 million on the school choice strategy. Businesses and individuals receive a 50 percent tax credit on donations to scholarship funds for students from low- and middle-income families to cover the cost of private school tuition in grades K-12.

With social impact bonds — often called “Pay for Success” models — private investors contract with the government to provide money up-front for early childhood initiatives, which is paid back if the programs are successful. Illinois, along with Idaho and Utah, uses the strategy.

Passing a local property tax increase or an option income tax is an increasingly popular option for funding early childhood education with long-term revenue. But raising taxes is a tough sell in Indiana, and likely more so in the state’s rural areas.

An effort to pass a local referendum for early childhood education in Indiana has failed before. In Columbus, voters refused to back a referendum in 2012 that would have supported a public-private partnership widely pointed to as a success.

The other new ideas for funding streams — tax credit scholarships and social impact bonds — also come with trade-offs, said Bruce Atchison, principal of early learning for the Education Commission of the States.

“If you have a big corporation that’s going to put half a million dollars into that, that’s great,” Atchison said. “But when the corporation moves from the state or has a downturn in profits, it might not be so willing. So the long-term sustainability of the social impact bond piece becomes a concern.”

While the report did not include a big-picture estimate for how much more money the state should spend on pre-K, it did put a price tag on the cost of not investing in early childhood.

Employers in Indiana lose $1.8 billion each year from workers taking time off or leaving their jobs because of child care issues, the report said. Those absences are equivalent to losing 31,000 full-time employees and result in costs to businesses for paying for parents’ time off, hiring and training new workers, and paying for overtime or temporary workers.

The report also said the state loses $1.1 billion in economic activity each year from people reducing their spending if they lose out on wages because of child care issues.

It’s a popular argument in support of pre-K: Early childhood education benefits the workforce, both this generation and the next. Advocates say increasing high-quality pre-K seats helps parents stay or get back into the workforce while preparing young children with essential skills.

“Economic development speaks to Republicans,” said former Indianapolis mayor Greg Ballard, a Republican himself who championed pre-K and co-chaired the advisory board. “I’m hoping they look at these figures and say, hey, maybe that’s something we should be looking at.”

He added that he hopes the ideas for public-private partnerships — which he used to launch Indianapolis’ pre-K program — will also speak to the Republican lawmakers who dominate the legislature.

“I don’t think there’s yet a general understand that this should be done for many reasons, not the least of which is economic development,” Ballard said. “It’s just not in our psyche yet that this is part of who we are as Hoosiers.”

The state’s pre-K program, known as On My Way Pre-K, is in the fourth year of its five-year pilot. At a cost of $22 million per year, it is available in 20 counties and pays for roughly 4,000 4-year-olds from low-income families to attend the high-quality pre-K provider of their choice.

If the state is to continue funding the pre-K program, advocates’ best shot for securing money is in the upcoming session, when lawmakers craft the state’s two-year budget.

Expanding pre-K is likely to have the support of Republican Gov. Eric Holcomb, who pushed in 2017 for an earlier expansion of the program to more rural areas of the state.

The issue has already won the support of Republican state schools chief Jennifer McCormick, who said earlier this month that too many Hoosier children enter kindergarten unprepared.

Advocates cite research showing the long-term returns on investment of pre-K and a study showing the success of pre-K in Oklahoma. They even point to research showing where Tennessee’s pre-K program fell short as an example of how important it is to maintain high quality standards for pre-K.

A recent report also showed that universal preschool in Washington, D.C., helped more mothers return to the workforce.

But funding is still likely to be a sticking point: How much money will lawmakers be willing to invest in pre-K?

“In a budget year, everyone has a request for something,” said Tim Brown, general counsel and director of policy for the Indy Chamber, in an interview last month with Chalkbeat.

Advocates say they are still struggling to convince people that pre-K is a worthwhile investment that amounts to more than daycare.

Indianapolis Mayor Joe Hogsett, a Democrat, said he believes pre-K has already proved its worth. Researchers have been studying the early outcomes of the state’s pilot program, which is showing both academic gains for children, and an increase in work and education opportunities for parents.

“I think the results of those programs are self-evident, that they do make a critical difference to get our young people off to a great start in life,” Hogsett told Chalkbeat recently. “So I hope that those results will speak volumes as the legislature crafts its next biennial budget.”

Launch pad

In a tough business, startups vie to become the Uber and Lyft of child care

PHOTO: Joe Amon/The Denver Post
Yemi Habte works with her daughters Charis Mandefro 9, and Anna Mandefro 2, as Stephanie Olson of Aurora, a MyVyllage mentor, watches during a mentoring session in Habte's home.

One summer morning, Yemi Habte sat at the kitchen table in her suburban Aurora home poring over a 10-page packet of child care forms with her mentor Steph Olson, a veteran child care provider who lives nearby.

Soon, Habte would open her own home-based child care business, Shining Little Lights, and Olson had come over to answer her questions. Habte wondered what to do if parents didn’t want to list their employers on the form? Or wanted their children to have only organic food? The pair also talked through emergency contacts, sunscreen procedures, and field trips.

The friendly kitchen table meeting, punctuated by cups of rich Ethiopian coffee and a snack of crisp roasted barley, didn’t happen by chance. It was the work of a new Colorado-based company called MyVyllage.

The idea is to make opening and running a high-quality home-based child care business easier and more lucrative. That means guiding providers like Habte through the complicated start-up process, helping them fill open spots, and simplifying back-office tasks such as billing and record-keeping.

Over the long haul, MyVyllage has ambitious plans: minting more than 100,000 new licensed home-based child care providers and a million new child care slots nationwide over the next decade. It’s a lofty goal in an industry marked by low pay, long hours, a maze of regulation, and a steady decline in the number of licensed home-based providers.

But MyVyllage isn’t alone in this enterprise. A growing cadre of for-profit and nonprofit groups — with names like WeeCare, WonderSchool, Early Learning Ventures, and Pie for Providers — are using what’s called a “shared services” approach to help new and existing child care businesses achieve efficiencies they couldn’t on their own.

Think buying supplies or insurance in bulk at a discount, streamlining the state child care subsidy process, or using a common pool of substitute teachers, mentors or coaches. While many of the groups offer similar services, some emphasize technology solutions, others focus on hands-on help, and still others offer a combination of the two.

Early childhood advocates and philanthropists are generally enthusiastic about this growing segment of the market, seeing it as an overdue innovation in a patchwork-quilt industry that lacks central infrastructure and economies of scale.

But it also raises a key question: Will tens of thousands of people accept the offer to enter and stay in a notoriously tough business?

Louise Stoney, who runs Opportunities Exchange, a national organization that promotes early childhood shared services alliances, believes it’s possible. She thinks that the approach can do for child care what companies like Uber and Lyft did for ride-sharing.

Shared services, she said, have been used for years in other sectors, but is relatively new in the early childhood world — one largely built on the failed model of small, stand-alone businesses.

“They’re tiny little businesses,” she said. “They don’t have scale. They’re not maximizing automation.”

The point of shared services, she said, is to ”really think about efficiency as a value that matters and as a way to drive more dollars into the classroom.”

Origin story

Two mothers, Erica Mackey and Elizabeth Szymanski, founded MyVyllage in 2017 after struggling to find child care themselves.

The pair met while working on business degrees at Oxford University and both have backgrounds in entrepreneurship. Mackey, who lives in Montana, co-founded a solar energy company that provides affordable electricity to households in Africa. Szymanski, who lives near Boulder, co-founded a company that allows companies to establish the value of their shares and helped build a plastics recycling company in Tanzania.

“I don’t have an early childhood background. I’m a business-builder,” Szymanski said. “But I’m a mom with two kids.”

MyVyllage’s glossy website, dotted with pictures of smiling providers and bright-eyed children, offers an appealing pitch to prospective home-based child care providers — perhaps teachers or mothers interested in staying home with their own young children.

“Make going to work the best part of your day,” it exclaims. “Focus on the children. We’ll handle the rest.”

Other up-and-coming companies in the sector make similar offers. WeeCare, a Los Angeles-based company that aims to open a million new child care homes nationwide over the next decade, tells prospective providers, “Earn up to $90,000 a year doing what you love.”

WonderSchool, with 140 child care businesses in California and New York City under its umbrella, sells its services this way: “You decide how you teach,” “Set your own schedule,” “Make more money.”

At least two dozen other groups around the country are working to support early childhood businesses with a shared services approach. Many focus on a single county or region, operate with the help of grant-funding, and don’t aspire to major expansion.

One such effort, run by a network of child centers called Early Connections, is based in Colorado Springs. The group, which has a grant from the Michigan-based W.K. Kellogg Foundation, works with 38 established home-based providers to improve quality and business practices. It’s a hands-on model, with monthly coaching sessions, regular gatherings for peer support, and an equipment lending library.

Diane Price, who heads Early Connections, doesn’t see her venture growing much bigger, but applauds the early childhood shared services movement. It’s a boon to providers, who often work in isolation, and helps gives families more child care choices, she said.

But child care trends in Colorado and nationwide suggest that companies like MyVyllage are in for a remarkably heavy lift.

Although many families prefer home-based child care, particularly for infants and toddlers, such providers are closing their doors faster than they’re opening them. From July 2015 to July 2017, the most recent numbers available, Colorado’s non-24-hour licensed home providers declined 13 percent to 2,159 homes — a loss of more than 300 homes, according to the Colorado Department of Human Services.

The on-ramp

Here’s how the MyVyllage model works: Prospective child care providers enter into a franchise agreement with the company. MyVyllage provides help with state licensing, access to back-office technology, and a choice of seven early childhood curriculums vetted by an adviser affiliated with the Center on the Developing Child at Harvard University. It also matches providers with a local mentor who will work with them for up to two years.

Currently, MyVyllage has three mentors and seven beginning providers, about half in Colorado and half in Montana.

Once new providers open their doors, they pay a fee to MyVyllage equal to 10 percent of their child care revenue. MyVyllage leaders say that providers will recoup that money and more through discounts and efficiencies facilitated by the company.

The idea, Mackey said, is to “get businesses working so they’re making more money than they would without us.”

MyVyllage also gives veteran providers a way to boost their income. To that end, mentors receive a quarterly fee from the company for assisting new providers, though company leaders declined to specify how it’s determined.

Szymanski estimated that some mentors will be able to make $20,000 annually by mentoring 10 to 12 providers a year. In practice, that would probably mean providing a few months of intense mentoring to two to three providers at a time. It’s up to mentors how many mentees to take on at once, she said.

MyVyllage leaders are still testing different ways of charging mentors for tools, discounts, and benefits available through the company’s platform.

Currently, Steph Olson and and her husband Roger Olson are MyVyllage’s only mentors in Colorado. They run a top-rated child care facility called Kids’ Castle out of their Aurora home.

The pair launched the business in 2010 after leaving jobs in corporate America.

Watching the Olsons interact with toddlers and preschoolers in the sunlit front room of their home, it’s easy to see why they would be selected as mentors. They have a warm rapport with the children, a strong grasp of child care rules, and a wealth of activities and materials to keep the kids engaged. They also have an enormous waiting list.

One July morning, Roger read a book about a monkey who likes to play drums to a gaggle of children elbow to elbow on the floor in front of him. The Olsons’ dog Sugar, who looks a bit like a stuffed animal, meandered quietly through the room. A little later, Steph took notice of a little girl who tearfully admitted that she missed her mother.

“Should we gave Anna a huggie?” Steph Olson asked the children nearby. “Anna is feeling a little sad.”

A fresh start

Steph Olson is eager to help new home-based providers like Yemi Habte, who with her husband Wondi Gebrue, is now licensed to serve up to 12 children at Shining Little LIghts.

“I love paying it forward,” said Olson.

She also appreciates the sense of community MyVyllage is building among participating providers.

As she counseled Habte recently at the kitchen table, she said, “If you’re ever in doubt, just call me or email me, I’m here for you.”

Habte and Gebrue came to the U.S. from Ethiopia last year with their four children, ages 2 to 20. They moved across the ocean to be closer to Gebrue’s family. Prior to the move, Habte had been the general manager of a school. Gebrue had been a state minister of agriculture.

Habte, who is calm and soft-spoken, discovered MyVyllage through an online ad. Before she joined, she was interviewed by MyVyllage staff and toured Kids’ Castle. Steph Olson said she knew Habte had the right temperament for the job when she paused during the tour to help a child clean up spilled paint.

“To see that, I knew she had heart,” said Olson.

All told, the Olsons have provided about 14 hours of in-person mentoring — some at Kids Castle and some at Shining Little Lights. They also exchange phone calls and texts, and sometimes meet informally over coffee.

Habte explained her desire to open her home for child care, saying, “It’s my lifetime goal to be with children.”

PHOTO: Joe Amon/The Denver Post
Yemi Habte cleans up for snack time with her daughters, Anna Mandefro 2, and Charis Mandefro, 9, during a session with Stephanie Olson, a MyVyllage mentor in her home. (Photo by Joe Amon/The Denver Post)

After she and Steph Olson finished going through forms at the kitchen table, they moved into Habte’s family room, which had been transformed into a kid-friendly haven with colorful foam matting on the floor, an appealing display of children’s books, and a row of crisp white cubbies built by Roger Olson. The pale yellow walls were decorated with flower and butterfly decals and a Disney princess clock.

With Olson looking on, Habte practiced conversational exchanges on her 2-year-old daughter Anna, who examined a collection of pine cones, river rocks, and seashells at the table.

“Label what she’s doing,” suggested Olson.

“Do you want to touch this one?” Habte asked Anna as she handed her a pine cone. “Can you touch it?”

As the little girl looked over the items, Habte picked up a green and purple plastic magnifying glass and offered it to her daughter.

Digital generation

One of the things that excites funders and observers about the new crop of companies trying to strengthen the child care industry is that many are run by young tech-savvy entrepreneurs.

Stoney, of Opportunities Exchange, said she suspects that some millennials have come to see child care as ripe for innovation as they’ve become parents themselves.

Before that, she said, “Quite frankly, they really didn’t have a reason to care about our field. … It wasn’t until they started having kids and said, ‘Wait a minute.’”

The Denver-based funder Gary Community Investments has invested in several shared services newcomers, including MyVyllage and Wonderschool. It also awarded money to WeeCare and Pie For Providers through a national early childhood competition last spring. Gary also recognized Early Connections in the contest, but the organization didn’t win prize money.

Gary is also a Chalkbeat funder through the Piton Foundation.

Steffanie Clothier, child development investment director at Gary, said she’s encouraged some of these groups have plans to launch thousands of new child care businesses.

It’s exciting these groups are thinking about scale from the beginning, she said. Given their backgrounds and talents, they are the kind of founders that can say, “What is the kind of business model that can help a lot of providers?”

Jon-Paul Bianchi, a program officer at the W.K. Kellogg Foundation, said, “I think we should have those kinds of ambitious goals … because the need is clear.”

Bianchi, who said Kellogg has funded shared services work for about seven years, said it helps build critical capacity in the child care world, including in communities that serve low-income families and children of color.

“It’s been tough to get other funders to engage in it. It’s not super sexy. It’s not super splashy … It’s real nuts and bolts stuff,” he said.