Soothing lullabies play faintly in the background as Tobitha Holmes talks about the pandemic-era federal funding her W.I.S.E. Academy child care center in Cedar Hill, Texas, received.
“They had to provide us with the federal funding to keep us from closing our doors,” she said, crediting the aid with letting her keep teachers on her payroll to serve the 88 kids in her day care and before and after school programs.
Holmes is one of 220,000 providers across the country who benefited from the $24.5 billion in relief funding the federal government pushed out to child care businesses between 2021 and 2023.
A majority of the funding expired Sept. 30, though providers can spend the last payments until November. The aid helped providers stay afloat and its end has them reconsidering their expenses, pricing and whether they can even afford to stay open.
Holmes said she used about 75% of the funding she received for raises and payroll incentive bonuses since most of her 13 teachers were previously making under $15 an hour.
“I knew I had to sustain (the raises) once the funds were depleted. I gave more bonuses than anything,” Holmes said. She also gave low-income parents scholarships to pay for their kids’ tuition at her center.
Mike and Diana Mizell, a brother-sister team that operates Kaleidoscope Child Development Center in North Dallas, used the money to retain workers. They increased wages by 22%, offered periodic bonuses and helped pay for workers’ health insurance during the pandemic.
Alma Langrum, a 39-year child care veteran with two Aisha’s Learning Centers in Dallas, used relief funds to repair her facility in Oak Cliff, retain staff and invest in equipment like tablets so her employees could do online training courses while the children nap. With federal funds running out, she’s worried she may have to shut down her center in Oak Cliff because enrollment is down.
The loss of funding is potentially “catastrophic,” according to a nonprofit leader cited by the Federal Reserve Bank of Dallas and included in the most recent Beige Book — an anecdotal report of economic conditions across the Fed’s 12 regions.
“Multiple day care centers have already announced closures, with one nonprofit leader noting that the impact to affected families is ‘catastrophic,’ as there aren’t other options in the area,” the Dallas Fed reported.
‘Child care cliff’
The child care business was troubled even before the pandemic. At the start of 2020, Dallas County had 1,500 child care programs. The pandemic wiped out about 400, said Cody Summerville, executive director of Texas Association for the Education of Young Children, which works to increase access to high-quality early childhood education.
In August, Summerville’s organization conducted a study of 122 providers in Dallas County. Of those surveyed, 78% said they would have to increase tuition, 46% said they would have to reduce staff and 5% said they would have to close when federal relief funds expire. Policy analysts are referring to it as a “child care cliff.”
“Once the funding stops …, 48% of providers have indicated that they will likely have to close, a pretty precipitous drop off in what was already a declining supply in our child care,” said Jarrad Toussant, the Dallas Regional Chamber’s senior vice president for workforce and education.
The Century Foundation, a progressive think tank headquartered in New York City, estimates three million children across the nation could be left without care.
Christina Herrera, who works at an architecture firm, sent her 3-year-old son to W.I.S.E. Academy when the day care center she used at First United Methodist Church of Cedar Hill abruptly closed in November 2022.
She didn’t have any family or friends nearby who could help.
“The church program wouldn’t have enough employees to be open so then I would have to take off work to stay home until I was able to figure out what our next step was,” Herrera said, “You can’t afford to take days off, with the economy these days, you’ve got to have two incomes.”
Three-fourths of North Texas providers are considering hiking what they charge parents, Toussant said.
Dallas County parents spend more than $11,000 a year on child care, which is 14.6% of the county’s median family income, according to U.S. Department of Labor data.
If businesses raise their rates, parents will have to make difficult decisions about how to budget for child care. That could include decisions like one parent forgoing income by cutting back to part-time or leaving the workforce entirely.
Herrera said she started looking for day care before the pandemic, even before her son was born. Prices now are dramatically higher, she said.
“Even when thinking about growing my family, I have to think about, ‘Will I be able to afford child care for another one?’” Herrera said.
Existing funding in Texas
Child care facilities received different amounts of federal relief funding, calculated based on the number of children they were licensed to care for and the average market rate of child care in their region. Four star centers, the highest designation possible in Texas Rising Star, the state’s quality rating system, and those in areas considered child care deserts were eligible for additional funds.
The Texas Workforce Commission estimates each provider received over $250,000 on average in the first year of the program.
Some Texas providers will still have access to subsidies through the child care development fund. This $11.4 billion fund is federal money funneled through the state. TWC dispenses the money for the care of low-income children. Parents often have a copay and must work at least 25 hours to be eligible.
Child care is overwhelmingly a privately-operated industry, with roughly 85% of centers in Texas funded primarily by family tuition payments.
In fiscal year 2023, TWC said its annual allocation of $1.1 billion reached 140,000 children a day — around 12% of the licensed capacity of privately-operated child care programs in the state.
Kim Kofron, director of early childhood education for advocacy group Children at Risk, said more funding is needed at the federal, state, county and city levels “because the kids are there.”
Staffing and enrollment issues
Texas Health and Human Services, the agency that licenses child care centers, sets ratios for the maximum number of children one teacher can look after. For example, one teacher cannot care for more than four children who are 12 months old or under at one time. The maximum number of 3-year-olds a teacher is allowed to supervise at once is 15.
Providers often set the ratios even lower so teachers can give each child higher quality care. That means even if providers have the physical space to host more children, they often can’t because they can’t afford to pay more teachers while keeping the price competitive for parents.
Holmes’ W.I.S.E. Academy in Cedar Hill is licensed for 171 children and she has 88 enrolled. She often places one teacher with six or seven 2-year-olds, though the state allows a maximum of 11.
Child care centers are labor intensive, making it hard for providers to retain employees who can get paid more in other occupations. The average wage for child care workers in Texas is $13.37 an hour.
Two of Langrum’s employees left to work at an Amazon distribution center right up the street from her Oak Cliff center, she said. Before the pandemic, she had eight employees. Now she has five teachers who cover eight-hour shifts from 6:30 a.m. to 6 p.m. Monday through Friday.
At her other center near Love Field, she raised her rates by 20% to $205 a week for 3-year-olds and $215 a week for infants and toddlers up to 17 months since more parents there can afford increased tuition. That’s not an option in Oak Cliff, where state subsidies pay for most of the care.
Low enrollment exacerbates these issues.
Summerville said his survey showed half of the child care centers are enrolled at less than 70%. “There’s a high degree of fixed cost when you’re running a child care program, so when you have lower enrollment, it also raises the operating cost per child pretty heavily,” he said.
Langrum’s Oak Cliff center is licensed for 85 children but only has 40 enrolled. She said she was considering offering families transportation to the center to draw more business.
“We’ve already ordered advertisement flags in the front to try to increase our enrollment,” she said. “We’ve done too much work on the building, both inside and outside, to let it be without children.”
Texas loses around $7.59 billion in productivity every year due to employee absences caused by lack of reliable child care, according to a 2021 report by the U.S. Chamber of Commerce. The state also loses an estimated $1.8 billion annually in tax revenue from parents who could have worked but chose not to because of a lack of child care.
Child care businesses also spur economic development in their communities.
“A lot of people think we’re just babysitting while everyone else is working,” said Ora Lee-Watson, owner of For Keep’s Sake child care center in South Dallas. “But if you look at all of our small businesses together, we hire a large number of women who go on to buy groceries, pay rent and become independent.”
More than 46,000 Texans were working in child care as of May 2022, according to the U.S. Bureau of Labor Statistics.
The existential threat
Holmes said she hasn’t had to worry about her employees leaving for jobs at Amazon or fast food restaurants, but they have been exiting to work in school districts.
“We made sure our staff has done college courses and that they received a certification for child care,” she said, “so they are now leaving to go to the school districts and the charter schools because they can pay them more and they’re off for the summers.”
She wishes smaller child care centers could get a similar level of funding as the federal Head Start program and public school pre-K programs. The Head Start program, for example, also includes subsidies for providing meals.
“If only they could regularly reimburse us for the true cost of what it takes to care for these kids,” she said.
More and more school districts are enrolling 3- and 4-year-olds in pre-K. While this gives parents access to free care, it poses an existential issue for private child care centers because the older kids subsidize the more expensive and labor-intensive care of infants and toddlers.
Langrum’s center in Oak Cliff participates in a pre-K partnership with Dallas ISD. The school district gives a stipend to the teacher, who is one of Langrum’s five employees, while the center provides the classroom and enrolls the kids.
Though she participates in the partnership, Langrum said she thinks the district doesn’t fairly compensate the centers.
“They don’t give the centers enough money,” Langrum said. “I’m not satisfied with that and everybody in the district knows that.”
She’s also concerned about the long-term prospects of child care businesses. If school districts continue to enroll 3- and 4-year-olds, she said, child care centers will only be left to look after infants and toddlers, a potentially expensive proposition.
“A lot of the public schools are taking over the services that we used to provide our communities for early childhood … and they’re putting us out of business,” said Lee-Watson, a former DISD assistant superintendent.
Summerville said he thinks child care should be thought of as a public good like education, roads and bridges.
“I rely on doctors who have young children who are in child care, I rely on a cashier at H-E-B who has young children in child care,” he said. “It is something that we all benefit from, because it contributes to a stable supply of workforce in all the industries we depend on as everyday Texans.”
