In South Dakota, Momentum Grows For More State Child Care Funding
In South Dakota, Momentum Grows for More State Child Care Funding
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Unlike many other states in the country, South Dakota allocates minimal state funds for child care, and the existing subsidies for child care are not fully utilized.
However, if this pattern continues, South Dakota will lag behind in terms of its workforce and economic development. This was emphasized by legislators, child care providers, and economic leaders during a recent panel discussion hosted by South Dakota Public Broadcasting.
Currently, the state provides around $800,000 per year (the minimum requirement) to qualify for federal funding for low-income child care subsidies. Additionally, the state has utilized millions of dollars in federal COVID relief to provide grants to child care providers in recent years. The latest initiative involves using more COVID relief funds to offer grants to communities, enabling them to find innovative solutions to address the accessibility and affordability challenges in child care.
However, the availability of federal funds is dwindling, and the state lacks a plan to replenish them. Furthermore, providers argue that the funds provided previously did not effectively address the underlying issues.
While the SDPB panel highlighted the urgency and the need for collaboration between the public and private sectors, it also made it abundantly clear that increased state involvement is necessary.
David Owen, the President of the South Dakota Chamber of Commerce and Industry, stressed the need for change: "Inflation resulting from the COVID pandemic poses a threat, and this is a domino effect that our economy cannot afford. If we fail to find a solution, child care will shift from being a peripheral concern to disappearing altogether. This issue must be addressed."
Current subsidy program in SD exacerbates the problem
Out of approximately 29,000 children in South Dakota who qualify for subsidized child care, only 1,800 receive assistance, amounting to a mere 7%.
This statistic is alarming, according to Kayla Klein, Executive Director of Early Learner South Dakota. She attributes this low participation rate to two main factors: paperwork and reimbursement rates.
To tackle the low participation rate in the child care subsidy program, the first step is to address regulations that disqualify low-income families who would otherwise be eligible. Klein explained that existing regulations often exclude the very people who need subsidized child care the most, such as single parents, teenage parents, and homeless families.
Nicole Weiss, the early learning director for the YMCA in Rapid City, shared that out of the approximately 50 individuals enrolled in the organization’s child care programs for homeless families and teenage parents, only three receive subsidized child care.
This is primarily because regulations require single parents to seek child support payments before qualifying for assistance. However, some mothers may not desire to pursue child support due to various factors, including uncertainty about the child’s father, fear of an abusive relationship, and other circumstances. Teenage parents, in particular, are less likely to pursue child support, according to the nonprofit organization Zero to Three.
Additionally, the child care subsidy program mandates that parents work or attend school for a specific number of hours. This requirement presents challenges for homeless parents who are searching for employment. Homeless parents may encounter difficulties in obtaining the necessary documents required for program applications as well.
Klein emphasized that if homeless parents are unable to secure child care for their children while they search for work, they will continue to be unable to afford housing or escape poverty. She stated, "It’s as if the system perpetuates the problem."
Although some of these issues can be rectified through administrative changes, Klein acknowledged that this alone will not solve all the problems.
Child care providers face financial losses when accepting state subsidies
The second reason for the low participation rates is that child care providers incur financial losses when they accept state subsidies, according to Klein.
Approximately 60% of child care providers in South Dakota operate without state regulations, which means they do not have access to subsidy funds. Even among state-licensed providers, some choose not to participate in the subsidy program.
Providers may opt for unregulated status for various reasons, including difficulty meeting facility requirements in a home-based setting, a desire to avoid state involvement, or lack of financial incentives. Klein aims to address the latter reason.
State subsidies typically do not cover the full cost of a child’s tuition. Child care providers are faced with a dilemma: either they accept the loss of money by accommodating the child with the subsidy, or they ask the family to pay the remaining balance after the subsidy is applied.
If providers choose to have the family contribute a co-pay, there is a risk that they may not receive full payment. This can lead to headaches for the provider, conflicts with the family, and ultimately, the child being expelled from the facility.
Klein, an expert in the field, expressed her concern, stating, "Because we know that the parent is receiving child care assistance because they cannot afford it, why should we assume they are able to afford anything beyond what the state is providing?"
Furthermore, providers are hesitant to accept subsidies due to delays in receiving payment from the state. This adds to their reluctance in accommodating families who rely on subsidies.
In addition to these challenges, the state reimburses providers on an hourly basis. However, most families do not keep their children in day care for the entire duration of the provider’s operating hours. Consequently, if eligible parents pick up their child early, the provider does not receive payment for the full day, despite reserving a spot for the entire day.
Senator Tim Reed, a member of the Republican Legislature, is taking the lead in addressing child care issues. He emphasizes the importance of investing in South Dakota’s workforce and believes that early learning plays a crucial role in a person’s development. Reed expressed concern that other states are surpassing South Dakota in their support for child care, leading to a better educated workforce in those states.
To illustrate the point, he cited examples from other states like New Mexico, Washington, Minnesota, Vermont, and New York, where significant investments have been made in early education and child care programs.
Reed’s main focus is to increase the reimbursement rates for child care providers. He argues that the current regional market rate system fails to adequately compensate providers for their expenses and employees’ salaries. Instead, he proposes basing subsidy reimbursements on the actual costs of running a child care business. Reed compares this approach to how nursing homes are reimbursed by Medicaid, ensuring that they can cover the full cost of care for residents.
While Reed hopes that increasing subsidy rates will encourage more providers to register with the state, he acknowledges that this alone will not address the entirety of the issue. Subsidies only fulfill a fraction of the overall need for child care.
Mike Bockorny, CEO of the Aberdeen Development Corporation, expressed his hope that action will be taken within the next year to address these challenges.
Exploring additional data and assessing funding options
Reed, along with five other lawmakers, attended the Hunt Institute’s Early Childhood Leadership Summit in Nashville this summer. It was during this event that Reed became aware of the significant contributions made by other states towards child care.
For Representative Linda Duba, a Democrat from Sioux Falls, the main takeaway from the summit was the need for South Dakota to evaluate its current efforts in this area.
Duba emphasized the importance of understanding the sources of funding, their origins, and the entities responsible for their administration. She raised concerns about whether the funding solely relies on federal pass-through dollars and questioned how many families are still being left without access to support.
In September 2023, South Dakota legislators, government officials, and early childhood experts participated in the Hunt Institute Early Childhood Leadership Summit, held in Nashville. (Rep. Taylor Rehfeldt)
The group intends to propose a collaboration with the Hunt Institute to conduct a comprehensive analysis of South Dakota’s child care system. This proposal will be presented to Governor Kristi Noem this year. Noem had campaigned on the promise of improving child care accessibility and affordability.
To finance the analysis, the legislators are committed to securing grants or business donations, eliminating the need for taxpayer funds.
Duba expressed the significance of receiving approval from the governor, highlighting that the proposal laid out a strong foundation for their objectives. She emphasized the importance of data in making informed policy decisions, stating that while emotions have their place, concrete data is what drives effective policies.
Beyond financial aid: What about the other 60%?
Duba expressed doubts about whether increasing subsidy reimbursement rates would result in an increase in the number of state-licensed child care providers.
Duba pointed out the additional responsibilities that come with licensing and regulation, such as meeting facility requirements like square footage and bathrooms. While she acknowledged the importance of encouraging providers to become licensed, she questioned whether this approach would offer an immediate solution.
In Sioux Falls, Duba suggested that the state and private sector could collaborate to address the issue. She proposed that businesses consider including child care as part of their employee benefits package. One example she mentioned was Black Hills Energy partnering with the Rapid City YMCA to provide child care services.
The YMCA, faced with 21 staff vacancies, made the difficult decision to temporarily close three classrooms and reduce their workforce by 10 positions. While the organization has formed various private partnerships and offers attractive benefits such as substantial paid time off and retirement packages, Nicole Weiss, the YMCA Learning Director, stated that these measures are still insufficient. She called for increased state involvement to improve wages.
Weiss argued that if child care providers are unable to afford basic necessities like groceries, then the benefits they receive become secondary. She stressed the necessity for the state to alleviate the financial burdens faced by child care providers to ensure the stability of the overall economy.
Brandon Hanson, the Executive Director of Child Care and School Age Care at Embe in Sioux Falls, shared similar concerns. Hanson highlighted that their starting wage is higher than the average, but it still falls short. He emphasized the difficult decision faced daily of either pushing families into poverty or pushing their own employees into poverty.
Karen Rieck, an independent in-home child care provider in Sioux Falls, revealed that after factoring in expenses and hours worked off the clock, she earns approximately $7 per hour. Rieck is forced to work a second job to make ends meet.
To adequately support the economic ecosystem, Weiss stated that the state needs to relieve child care providers’ financial burdens. She emphasized the urgent need for action, predicting that if left unaddressed, the lack of child care availability will lead to a dwindling workforce within the next one to two years.
South Dakota Searchlight is a member of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. South Dakota Searchlight maintains its editorial independence. Contact Editor Seth Tupper with any inquiries at info@southdakotasearchlight.com. Follow South Dakota Searchlight on Facebook and Twitter.
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