How Minnesota’s child care industry has managed to hang on amid the pandemic

Lynn Barten has been a family child care provider for 22 years, a mainstay in an industry that has a shrinking workforce. 

Barten first ran the business out of her Alexandria home, but then bought a second house to have more space for the operation. She has earned child care credentials, an associates degree, and is a state-approved instructor for other providers.

Yet the COVID-19 pandemic nearly forced her to close permanently. When parents began keeping their kids at home, the lost tuition — along with the increased costs of buying outbreak essentials like cleaning supplies — forced Barten to dip into her savings. She went months without a salary until she qualified for a state grant. “I was very close to leaving the profession, I really was,” Barten said in an interview last week as children played with bubbles and picked tomatoes in her leafy backyard.

As Minnesota enters month six of the COVID-19 pandemic, child care experts say Barten’s story is a common one. Predictions of widespread closures have not come to pass, at least for now, while government aid has propped up thousands of providers. But the industry remains a wobbly one, reliant on low-paid professionals forgoing income and taking extraordinary measures to continue to operate safely.

State and federal money flows to providers

In the early days of the pandemic, Gov. Tim Walz asked child care providers to stay open and serve children whose parents were considered essential workers. But as Minnesotans began working from home, or were laid off, scores of families pulled their kids out of programs. Many providers faced a debilitating lack of tuition revenue.

Even before the pandemic, most child care providers made little money and ran on razor-thin profit margins. And the industry faced other troubles: In many pockets of the state, there are not enough providers to care for children, a problem that has been exacerbated by the declining number of small operations often run out of people’s homes — businesses that are more common outside of larger cities.

Soon after Walz shut down public life in Minnesota, child care advocates warned the industry might collapse altogether. That could make economic recovery from the pandemic all the more difficult, since most parents need child care to work. 

The Legislature responded in late March by approving three rounds of payments, dubbed “peacetime emergency grants,” for child care providers. The state offered $29.6 million from its funds for the grant program and tacked on another $10 million from the federal government.

Child Care Aware of Minnesota, a nonprofit that administered the grant program, received 14,143 applications over the three grant rounds and money was sent to 5,398 programs. Of those, 704 programs received money three times. The minimum grant award is $4,500 per month, but they can range as high as $21,000 for larger child care centers.

Minnesota also tapped more federal aid to benefit the industry. In June, state lawmakers voted to use $21 million from its slice of the federal CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) for a one-time increase to reimbursement rates for providers that serve children of low-income families using the Child Care Assistance Program. The state had been long out of compliance with federal reimbursement requirements for the subsidy. 

On July 7, Walz announced he would direct another $56.6 million from the CARES Act to child care providers. In contrast with the more competitive grant program, which favored child care businesses that served children of essential workers, the new cash is available to all providers who meet certain eligibility requirements. Providers must be open and serving children as of June 15, for instance. The first monthly payments from that cash are now being distributed, and two more payments will be made, according to the state Department of Human Services.

The state also used the CARES Act for several smaller relief efforts, such as $422,000 to buy crucial supplies for providers.

“Child care providers play a critical role in caring for children and supporting our economy by enabling children’s parents to go to work,” DHS Commissioner Jodi Harpstead said in a written statement. “They have gone above and beyond during the public health emergency, and are now facing additional costs to ensure the health and safety of their staff and the families they serve. We want to support them as much as we can with this funding.”

An industry that remains stressed

Heidi Hagel Braid, chief program officer of First Children’s Finance, a nonprofit that helps providers around the country navigate the economics of the industry, said Minnesota’s actions were generally on par with other states — most offered a chunk of money to providers through the CARES Act.

That government intervention may have staved off an implosion of the child care industry. Suzanne Pearl, Minnesota director of First Children’s Finance, said state licensing data does not suggest a wave of closures.

But that does not mean the industry is stable, Pearl said. Many child care programs are still running with fewer children than normal, causing them to lose tuition and often leaving providers without income, Pearl said. That can be a huge issue, particularly for family programs, which are small and run largely by women in their own homes.

Pearl said she is still trying to research how successful child care businesses were in getting loans through the federal Paycheck Protection Program, but she also suspects some programs, especially those run by people of color, had trouble with PPP because those providers may have fewer ties to the financial system.

Nevertheless, many child care providers stayed open because the state asked them to serve essential workers, Pearl said.

Despite a $1,000 grant in March from the West Central Initiative — one of six foundations around Greater Minnesota that have offered their own smaller grant programs for child care — Barten said she started panicking in April when there was no end in sight to the pandemic and she had just two children in regular attendance. She normally serves six to 10 kids.

Barten pulled money out of savings to pay the bills. She also said she couldn’t get a PPP loan because she did not have a business bank account.

In June, Barten got money from the third round of the peacetime emergency grants, and more children returned to her program. “It’s made a huge difference in being able to breathe a little again and actually pay myself something for working,” Barten said. “Really since March I haven’t been taking any kind of payment.” She is also now getting cash support from the $56.6 million in CARES Act funds being distributed to providers.

Mary Rotter, who owns two child care centers in Detroit Lakes with her husband, said she was able to get a PPP loan, a grant from the West Central Initiative and a peacetime emergency grant. But early in the pandemic, their enrollment was down from about 75 kids a day to 15. The centers were able to stay open and keep their employees because of the PPP loan, the grant money — and because families opted to pay tuition while their kids were at home.

But Rotter said she and her husband stopped taking a salary when Walz’s stay-at-home order started because they felt it wasn’t right to take those profits while their families were paying but not getting care.

Still, as COVID-19 cases have once again ramped up in Minnesota, prompting federal health officials to warn of a surge, Barten said she is “probably more stressed than ever.”

Her finances are rocky enough that she is taking school-age children — providers typically serve infants through preschoolers — and another shutdown or continued economic recession could end her business.

For the industry as a whole, even if the economic situation improves, any progress toward easing child care shortages has been paused or set back. Karen DeVos, who owns a child care center in Ada, said she has put plans for a second center on hold for a year. Her current business is the only child care center in Norman County.

“I’m really concerned about the longer this goes on the more we’re going to lose,” said Pearl, of First Children’s Finance, arguing that the government should do more to intervene. 

Any new money for child care in the near future is likely to come from the federal government. Congress is currently negotiating another coronavirus relief package and U.S. Sen. Roy Blunt, R-Missouri, told the Washington Post on Tuesday that child care could be an area of agreement between Democrats and Republicans.

“Given the state of the economy in Minnesota, any recovery is going to depend on the availability of child care supply,” Pearl said. “Which means the capacity that we have now we’re going to need to maintain and preserve. Even though providers have really lost a lot and have given a lot, we need to make it possible for them to say in business, to ride this out so the rest of us can recover along with it.”