How Child Care Providers Are Paying for a State's Budget Crisis

The following is the condensed version of one of four narratives offered in New America's report on the state of American child care, published by our Better Life Lab, for which the author of this piece works as an analyst. Read the other condensed narratives—on child care in Georgia, Massachusetts, and New Mexico—in the Atlantic.

Empty buildings are scattered between neighborhoods of post-war era single-family homes in Lyons, Illinois. In a nondescript shopping center, tucked between a laundromat and nail salon, sits Little People Montessori Academy. Only from the large, green strollers parked outside can one tell there might be learning taking place indoors.

Regina LeFlore, the owner and director of the Little People Montessori Academy, has worked in child care for 25 years. She takes pride that Little People Montessori Academy offers high quality care - it’s  a licensed child care center and American Montessori Society member in the process of being rated by Illinois’ ExceleRate quality rating system. But with high quality comes high cost. Care at Little People can range from a steep $1,466 per month for the infants to $990 for the three to five year-olds. And still, she operates, like most other small child care providers, on razor thin margins.

Though a private child care provider, LeFlore believes in offering high-quality education to all, no matter the ability to pay. To do that, , LeFlore, like many other providers, relies on government funds: state child care subsidy dollars, Illinois pre-K dollars, and federal Head Start dollars. That approach ensures her Montessori-certified teachers are paid a living wage, unlike the vast majority of caregivers who earn poverty wages. If receiving support, parents pay the difference between the tuition she charges and any funds the government provides.

In recent years, however, LeFlore’s ability to take on all students has been hampered by a growing and intensifying budget crisis in Illinois. In the face of a massive deficit - $8 billion dollars in unpaid bills - state lawmakers chose to radically cut the number of students who could qualify for child care subsidies, and state payments for those remaining students were delayed. With that decision, LeFlore’s already precarious situation turned dire.

In the Care Index, a data and methodology collaboration between Care.com, the largest online market for care, and New America, a nonpartisan think tank, Illinois was rated in the third quartile, on the lower end of the scale, for the trade-offs it makes between cost, quality and availability in its early care and learning system. Child care is expensive. The average cost of care for one child in a family home or center, $10,228 a year, is 94 percent of the state’s median rent. That care represents 18 percent of the state’s median household income, and, for a family with a single minimum wage earner, 60 percent. Only 21 percent of the state’s child care establishments accredited.

Illinois was once a national leader in early education, one of the first to adopt state-funded preschool for 3- and 4-year-olds, and the first to mandate bilingual education in public preschool programs. That’s all changed. Although economists have found that every $1 invested in quality early care and education can yield six to eight times that in returns over the course of a life, Illinois, like a number of other states, is actually cutting back. “We are no longer at the top of the pack. The money is not there and programs are closing,” said Sara Slaughter,  executive director of the W. Clement & Jessie V. Stone Foundation, a Chicago-based organization that supports initiatives to improve early childhood education and development. “The damage done from the budget crisis is about more than just the money,” she added. “It chips away at a decade-long policy process to improve children’s early education and opportunity in life.”

At Little People Montessori Academy, when state subsidy funds dried up, LeFlore decided, rather than refuse to teach students from financially struggling backgrounds whose subsidy payments were stopped or delayed, she’d subsidize the students herself. So she went to the bank and took out a personal loan.

“Every day, I pay $160 dollars on a high-interest loan,” LeFlore said. A poor credit history disqualified her from other options. . She did this because she knew that she is not the only one who looks to the state for help: so do low-income parents across Illinois and the country who need someone to care for their children so they can work. And if they can’t afford high quality care on their own, or get help to pay for it, many are forced to quit, cut back on work, which puts their family’s financial stability in jeopardy, or they look to cheaper, informal and often unreliable arrangements.

She used to offer 50-50 slots: 50 percent of parents paid in-full out-of-pocket, and 50 percent paid through a combination of personal income and support from state and federal funds. Yet now she now has to seek out more tuition-paying parents since the state funding has been so unreliable. “It’s been tough, but I didn’t want to kick any students out,” says LeFlore. “I’ve worked with families in the program to find a way to stay.” The ratio is 65 percent private to 35 percent public.

From Budget Crisis to Child Care Chaos

Budget crises aren’t new to Illinois; for years, the state of Illinois has taken in less money than it spends. As a result, in 2011, lawmakers passed a temporary income tax increase to help the state pay off a backlog of unpaid bills. When the tax increase ended, a battle ensued over which programs to cut, and by how much.

Governor Bruce Rauner, a Republican, was elected in 2014 with a mandate to balance the budget, looked to cutting spending on social services like child care subsidies, pitting himself against advocates of social services. In 2015, the state of Illinois changed child care requirements, dramatically reducing the number of families who could be eligible for subsidies. Eligibility requirements became more stringent; parents enrolled in school were no longer eligible for child care assistance, and income limits were reduced from 185 percent to 53 percent of the federal poverty line. As a result, 90 percent of those formerly eligible became ineligible. The governor eventually raised the income limit to 162 percent of the federal poverty line in November 2015. But thousands of children remained without access to the subsidy program. Estimates range from 15,000 to 55,000 children still left out that had once been covered. According to the OUNCE of Prevention Fund, a Chicago-based funder and operator of birth-to-five programs, 125,545 children received child care subsidies in 2015, down about 22 percent from the average 160,000 children receiving subsidies in previous years.

Like LeFlore, other child care providers have sought to continue their mission to serve the neediest families at great personal cost throughout the budget crisis; taking out lines of credit, loans, soliciting for private donations, and downsizing so they can continue to provide services to needy children regardless of whether and when the state of Illinois pays. Many of those providers have folded. In January, the largest provider of social services, Lutheran Social Services of Illinois, reduced its workforce by 43 percent, eliminating more than 750 positions. Some 60 providers, including Metropolitan Family Services and the Ounce of Prevention Fund, are suing the state for lack of payment, which advocates say has decimated the painstakingly constructed early care and learning infrastructure, primarily for children from lower-income families, for years to come.

The state also increased the amount of money a family must pay out of pocket, or co-pays, depending on income and family size. And while state payments were delayed for child care, the budget covering Illinois Department of Human Services and other social services programs, like home visiting,  a program that has been shown to be effective in boosting early care and learning, paid out at $0.65 on the dollar.

All of which left care providers like LeFlore without the money they needed to provide care for the families who need it, and struggling families without the money required to pay for quality care.

The Cliff Effect

Stephanie Dziedzic, a hair stylist at Sports Clips in downtown LaGrange, is one of those parents, terrified the budget crisis will upset the fragile balance she and her family have created to make ends meet. She pays $79 per month to send her three-year-old daughter, Gianna, to the Little People Montessori Academy. “I can go to work with my mind at ease. I know Gianna is safe and learning by leaps and bounds,” she said.

Yet, as a result of the crisis, she now is facing a higher parent co-pay: “It’s a shocker… they told me I have to pay $270 within the next month, and I really don’t have that extra money at this point.” Already, Dziedzic and her daughter have moved in with her mother, her sister, her fiance and his two children - seven people in total - to cover the cost of rent and child care.  Dziedzic’s mother has also recently taken unpaid leave after surgery, but is driving for Uber to help make rent. On a day like Thursday, when Dziedzic works odd hours, Gianna’s grandmother watches her after school. Sometimes Dziedzic works two nights per week, sometimes weekends, when Little People isn’t open.  Her schedule is  unpredictable, which can make child care arrangements that much more challenging.

Dziedzic has already had one scare: Every six months, recipients of child care assistance have to “re-determine,” or re-apply. A few months ago,  state officials said she didn't qualify anymore. But they later reversed themselves, saying  the decision  was due to a glitch in the system.

Right now, Dziedzic is stuck: If she picks up more shifts and earns more, she’ll make too much money and no longer qualify for the subsidy. And if she earns less, with the higher co-pay, she won’t be able to pay her bills.   

Forced to Choose between Quantity and Quality

More than a year after the budget crisis began, the state is still at a stand-still. In July of 2016, Illinois finally passed a temporary budget, but it is not enough to cover the losses child care providers and families have suffered, the damage done to the early learning infrastructure, or to provide long-term security and relief that this won’t happen again. Judith Walker-Kendrick, director of the Chicago Coalition of Site-Administered Child Care Programs, provider of technical assistance to early learning agencies funded by the city of Chicago,  confirmed agencies are forced to choose between availability or quality, if not closing fully: “There isn’t enough funding for everyone, so you have to make choices. Are you going to reach everybody or are you going to reach a few with quality? At some point you have to make a choice between quantity and quality.”

The budget for care isn’t just insufficient, it’s also unstable. Funding for early learning (and other relevant human services) needs a predictable baseline of funding, advocates said. Though early learning quality has been, ironically, a focus of Governor Rauner’s administration, advocates said the lack of funding limits child care providers’ ability to implement, provide and maintain quality measures.

Back in the dingy shopping mall, LeFlore, too, is stuck: with the lack of funding, she’s caught between her competing commitments to pay good wages to highly trained teachers, and to continue to offer high quality early care and learning to even the poorest children. Already, she’s had to close one classroom and rent out the space. That’s now become the Nail Studios nail salon next door.  

Though the situation may be more dire now, LeFlore emphasizes that  financial uncertainty in the child care system is not new. Over the years, LeFlore has learned “how to spread the money out”—she negotiated with her landlord to pay in installments, and takes out loans so that in months like July—when the state sent subsidy payments nearly a month late—she can make payroll. As LeFlore closes for the day, kids trickling out with their parents, she wonders how she's going to repay that loan and worries about the security of school, and her own financial future. She needs help, she thinks Many of the families she serves needs help. She just wishes the state of Illinois would.