Proposed state spending cuts to child care subsidies would ‘gouge’ industry across the state

Parts of an unprotected child care subsidy program for working families are on the chopping block.

Exactly which areas of the Working Connections Child Care program lawmakers will roll back is still unclear as the session nears its close on Thursday, but providers around the state are bracing for cuts to reimbursement rates that some say will deeply affect their businesses and child care as a whole.

The Working Connections Child Care, funded in part by the state and federal governments, offers providers subsidies for enrolling kids whose families earn less than 60% of the state’s median income. To qualify, a parent has to be working or in school. Families still pay a copay of up to $215 a month, depending on the family’s size and income.

Kerra Bower, owner of three child care centers around Spokane, has long been involved with child care policy at the state level. Over the years, she’s seen gains and losses for her industry, but this year is the most worrisome, she said.

“It’s very disheartening to see this happen when we are poised for greatness and achievement, our hands are being tied again,” Bower said.

Several bills would reduce state spending on child care in different ways, like rolling back reimbursement percentages compared to cost, halting planned expansions in income eligibility for families to qualify for subsidies or changing the formula under which providers receive reimbursement based on student attendance. Child care providers are largely opposed to these bills.

“I mean these aren’t even cuts, these are full-on gouges to early learning,” Bower said.

A more popular proposal among providers would establish a survey to determine the actual cost of child care to providers, likely boosting the reimbursement rate more in line with actual costs.

Gov. Bob Ferguson on Friday morning unveiled details in his proposed income tax on millionaires, saying 5% of that revenue would be earmarked for early learning and child care in Fair Start For Kids accounts.

Perhaps the most impactful proposals for child care businesses are ones that alter how much child care centers are reimbursed. Under the Working Connections program, the state reimburses providers per student based on their attendance. It provides $49 to $68 per student per day to providers in Spokane County, depending on the kid’s age.

A student can miss their child care for all but one day in a month and the provider is reimbursed for the whole month of attendance, as long as those absences aren’t planned in advance and communicated with the center.

A House proposal that moved to the Senate on Wednesday would change the formula so that kids have to attend more days of child care in order for the provider to be reimbursed for the full month. If a student misses more than 10 days of child care, the provider receives half as much reimbursement in that month. The bill also lowers their reimbursement rate compared to the provider’s costs . The combined cuts in this bill would save the state some $103 million in the next biennium, according to state estimates.

The suggested reimbursement rate is in line with federal child care subsidy programs, said bill sponsor Rep. Mia Gregerson, D-SeaTac.

“We also make sure that we take care of the budget when it comes to sustainability and recognizing that case loads and the cost is really getting to a point where we’re not able to sustain that,” Gregerson said in floor debate.

The bill passed the House floor on a 54-44 vote with one representative excused.

The bill drew large Republican opposition. Rep. Travis Couture, R-Allyn, said he appreciated the attempts at cutting costs, but couldn’t support it.

“What I fear is that it’s a cost savings on the backs of an industry, our child care industry that is suffering right now,” Couture said.

Other Eastern Washington lawmakers said the bill would hurt their districts the most. Rep. Mary Dye, a Republican who represents Whitman County, said Colfax doesn’t have a licensed day care because of the regulations that makes such centers financially inviable. It goes on to further hurt the region, making it a “child care desert” that drives parents away.

“Without child care, how do you keep the teachers in your school? Without child care, how you get the health care personnel that you need?” Dye said. “That’s what’s happening in Eastern Washington; we’re being depopulated by default and it’s childcare at the base of it.”

Based on February attendance at Raze, where up to 90% of her enrollment qualifies for some sort of state subsidy, Bower said 9 of her 60 Working Connections pupils attended fewer than 10 days. Under the House proposal, in this scenario, her center would be reimbursed for half a month for those students, not the full month as it is now.

“It’s like I cannot even articulate exactly how devastating that’s going to be,” Bower said on Friday as she sat down to draft budgets for her centers Raze and Little Scholars.

She doesn’t yet know the financial implications for her own businesses, but fears for the worst given other proposals floated that would reduce subsidies from 85% to 75% of the market rate for child care, as set by the state based on the 2024 economy, also when minimum wage was lower. As other costs like staff pay and insurance only rise, she paints a bleak future.

“We are being gouged to the point where you will see child care centers closing exponentially, I mean we are already barely hanging on,” Bower said.

Colleen Condon, owner of Lilac City Early Learning Center in north Spokane said the assurance of monthly funds are essential to keep the lights on and pay staff at her center, as her expenses don’t stop just because a student isn’t attending regularly.

“As long as a kid attends during the month, we could know for the whole month if we were expecting them to be attending, which is how that should be,” Condon said. “That works best for the business, because if I have a kid or two out sick in a classroom, I can’t have one less teacher in the room.”

Condon and providers were expecting their reimbursement rate to switch to enrollment-based, where they were paid regardless of a student’s attendance. A Senate proposal would prevent this expansion and effectively reduce reimbursement further, allowing providers to collect for 15 days if a student attends once in a month. They can claim further reimbursement each day beyond 15 days attendance. This bill has yet to be brought to the Senate floor for a vote; state estimates indicate it would save around $94.6 million in this biennium. The bill would also reduce reimbursement rates compared to actual provider cost and stop a previously planned expansion for more families to qualify, bringing the state’s savings in the next biennium to $696 million.

If lawmakers change these rates, Condon expects she will have to quickly eliminate 23 of her 79 slots available for families paying with Working Connections subsidies.

She said it’s infrequent that a child attends her day care for just a day each month. When attendance starts to fall, it’s typically because their family has larger barriers that further exacerbate their need for accessible child care, both Condon and Bower said, like homelessness or escaping domestic violence.

“I’m really concerned those families that are experiencing trauma, experiencing those really hard barriers, are unfortunately going to be the families that we have to turn away now when I can’t bill but I still have to staff the same, I still have to pay my teachers,” Condon said. “I can’t afford to have kids that I can’t bill for their attendance. I think that we’re going to inadvertently be disadvantaging those families far more.”