Child care operators being hit on all sides in San Mateo County

Publicly funded transitional kindergarten got a major boost after Senate Bill 130 was passed in 2021, which expanded eligibility for TK enrollment to 4-year-olds by the 2025-26 school year. Department of Education figures show that 291 4-year-olds were enrolled during the 2022-23 school year in San Mateo County, and the figure will likely spike over the next couple years.

While Karen Pace, an educational contractor with All Five, acknowledges the importance of accessible TK, she said that age group typically subsidizes the operational costs of caring for infants and toddlers, who require more resources and investment. With fewer 4- to 5-year-olds enrolled, many independent providers are concerned if, and how, the county and state will make up the difference for the inevitable financial burden they will take on.

“If we have a school of 90 kids and 60 of them are preschoolers, that is one calculation. If 60 of them are infants and toddlers, that’s a far different financial model. So the cost for providers, when you push down the age of the children enrolled, goes up markedly,” Pace said. “It’s also the size of facilities needed. So, in our infant room, we have eight children max, and in our preschool room we have 20 children max, so you can do the math that you need far more classrooms to serve the same number of children if they’re younger.”

For Ward, who operates four Peninsula facilities serving children from infancy to 5 years old, the organization only breaks even if all locations meet at least 80% enrollment, as their profit margin for infants is nearly zero. And because payroll makes up the bulk of spending, lower teacher-to-child ratios required for younger children are particularly challenging as well.

“At a 1-to-3 ratio, you only have three kids to cover a teacher’s salary and everything else, so if you’re trying to run a program with [infants], it’s going to be very hard to do. It’s going to lose money,” Footsteps Director of Finance Nick Foletta said. “It’s subsidized by the classrooms where you can have potentially 12 kids with one teacher for a slightly lower rate.”

Help from above

But while many providers are hoping the state increases funds, they also haven’t forgotten that it took a pandemic for the state to modestly increase their reimbursement rates — which allow child care centers to provide subsidies for qualified families — even though they had been pushing for it well before the onset of COVID-19. And though a hefty injection of emergency funding helped many organizations stay afloat, offer better employee benefits and undergo infrastructure improvements, they won’t be a reliable source of revenue long term.

Most of the families that Footsteps and All Five work with receive at least a partial subsidy, meaning the organizations are especially reliant on state funds, regardless of students’ ages. Foletta said the state used to reimburse them about 60% of the private-pay tuition cost and now receive 80% since the pandemic.

“We had a program in Redwood City that’s currently not open … it was probably about 80 to 90% low-income families, and based on the reimbursement we were receiving from these contracts, it never broke even. Had we been running it under the current rates, it would’ve been a profitable center,” Foletta said.

The reimbursements allow Footsteps to provide affordable child care to many families throughout the county, including Laura Castillo, whose 4-year-old is currently enrolled in its San Mateo location. Castillo and her husband previously paid about $1,600 per month at another facility before a friend told them about the financial support they could receive at Footsteps. But she said there is always a concern that a promotion or making a little extra money could make them exit out of the program eventually, as there is a fixed income cap that would make them ineligible for assistance and therefore on the hook for the full tuition.

Depending on the type of program and family size, if a one- to two-person household makes more than about $6,000 to $7,000 a month, they will have to pay the full bill, which ranges from about $2,750 monthly for infants and about $2,000 for preschoolers at Footsteps.

“What is hard is if you make a hundred dollars too much, you get nothing. You won’t qualify for anything. You can’t have half your tuition covered, a quarter of your tuition covered, you get nothing,” Foletta said. “And so we’ve had families that will literally miss it. They’ll have too much overtime on a check. We’ll have to tell them, ‘wait a month, work less overtime, come back to us.’ You make a hundred dollars too much a month, and so now you have to pay thousands in child care.”

Kids Konnect has to rely on families who pay full tuition to make up for the less than 10% of families who receive subsidized tuition, and about 40% of All Five’s revenue comes from philanthropic donors. That allows them to offer a sliding scale for most families, although that’s usually not an option for many organizations.

But while raising the income threshold to receive subsidies would certainly improve child care accessibility, a bigger challenge that providers like Footsteps has involves finding enough staff, especially for the younger age group. Several of their facilities are operating at below 50% capacity, which Footsteps founder Karen Haas-Foletta said is not a result of decreased demand. About 71% of child care demand is met in San Mateo County, amounting to about 17,000 more spaces needed, according to a 2022 report. Only 34% of infant child care needs are met.

Good help is hard to find

Finding qualified employees who want to work with young children was never easy, but Haas-Foletta said it’s particularly challenging right now. While there is a national shortage of teachers and early childhood educators, she feels many high school students are pushed into higher-paying technology jobs particularly in the Bay Area.

“We have been hiring people that don’t have their units that are willing to take them, and then we’re having to help them and pay for them to go through schooling so that they get their units to qualify as a teacher, because that’s really what we need is qualified teachers, but we’re just not finding that,” she said.

Pace agrees that more competitive pay and benefits can attract and retain qualified teachers, but that requires dedicated policies and funding mechanisms that are less piecemeal and more holistic. She said they’re still in the early phases of robust change on the state level.

“We’re in the education stage and are hoping that legislators will pick up the baton and make the necessary changes at the state level because the provider crisis, the early childhood education crisis, is going to get worse and worse as organizations won’t be able to stay in business without a viable financial model,” she said. “So something’s got to give.”