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Why there’s such a vast gap at the Minnesota Legislature among plans for child care spending

The split over plans for child care spending is one of the starkest differences between Republicans and Democrats at the Minnesota Capitol this session. 

Gov. Tim Walz
The biggest ticket item in Gov. Tim Walz’s child care plan is a huge investment in the Child Care Assistance Program, which is the main subsidy for low-income families in the state.

Throughout the pandemic, the state and federal governments have approved vast sums of money for Minnesota’s child care system, hoping to stabilize an industry that was ailing even before COVID-19.

One count from last October pegged the influx of funds under the purview of the Department of Human Services since 2020 at $858 million. Despite that unprecedented aid, Democrats at the state Capitol have sweeping plans to spend some of Minnesota’s record surplus on child care, with the aim of helping providers and low-paid employees as well as families struggling with high costs.

The Republican-led Senate, however, has a much different direction. The GOP doesn’t have any proposals for new spending specifically on child care, though party lawmakers are pushing for broad tax cuts this legislative session targeted at helping families, especially amid rising inflation. 

Walz, House, spend big

The split over child care is just one of many areas where Republicans and Democrats at the Capitol have starkly different plans. Legislative leaders will have to negotiate over how to use the state’s current $9.25 billion surplus in the last three weeks before the Legislature is set to adjourn. (The DFL child care plans would also tap into a projected additional $6.29 billion surplus in the 2024 and 2025 fiscal years.)

The biggest ticket item in Walz’s child care plan is a huge investment in the Child Care Assistance Program (CCAP), which is the main subsidy for low-income families in the state. 

Walz would boost the rates paid to child care providers for accepting families on CCAP. Right now, Minnesota’s maximum reimbursement rates are at the 40th percentile of a market rate survey for what businesses charge to care for infants and toddlers and the 30th percentile for preschool and school-aged children, which are both above a minimum required by the federal government

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But Walz would boost the maximum rates to what the feds actually recommend — to the 75th percentile — meaning tuition costs would be fully covered by CCAP rates at roughly three in four child care providers. Twenty-two states have set all or some of their maximum rates at the 75th percentile or higher, and Minnesota’s rates put it slightly above the bottom 10 states

Walz would also eliminate a waitlist in CCAP, and expand the program to include foster care families and more. The CCAP provisions total only $188,000 in state money in the current fiscal year in part because of available federal funds but would be significantly more expensive for Minnesota in the following two-year biennium. Over three years, the price would be nearly $820 million.

The Walz plan would also continue some grants aimed at helping child care providers in financial hardship due to the pandemic. The federal American Rescue Plan had money for this purpose, and Walz would keep some cash flowing for the hardest-hit providers after the ARP grants run out.

Another major proposal from the governor is to expand the state-funded pre-K system for eligible 4-year-old children, adding more than 22,000 kids at a cost of $155 million this year and another $370 million in the following two years.

There are other programs aimed at young children and early learners. The Walz administration says total new child care and early education spending proposed by the governor is $1.8 billion over three years.

During an interview Thursday at the MinnPost Festival, Lt. Gov. Peggy Flanagan said the state has tried to respond “in a pretty comprehensive way” to help child care throughout the pandemic. But she said there’s more the state can do to not only help raise wages for child-care workers but also help businesses stay afloat and make care cheaper for parents.

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“That was a program that my mom utilized for me back in the day,” Flanagan said of CCAP. She “was able to go back to school, get a better paying job.”

The plan introduced by House Democrats is similar. It would also raise CCAP rates to the 75th percentile and expand the program. The House plan would also reduce but not eliminate the CCAP waiting list. The House would also make bigger stabilization grants for the industry permanent, injecting more into ongoing subsidies that help pay for worker wages and business costs.

During an interview Thursday at the MinnPost Festival, Lt. Gov. Peggy Flanagan, center, said the state has tried to respond “in a pretty comprehensive way” to help child care throughout the pandemic.
MinnPost photo by Greta Kaul
During an interview Thursday at the MinnPost Festival, Lt. Gov. Peggy Flanagan, center, said the state has tried to respond “in a pretty comprehensive way” to help child care throughout the pandemic.
Like Walz, House DFLers would also add new slots to the state-funded pre-K system for 4-year-olds and increase by 20,000 the number of early learning scholarships, which pay for high-quality child care for low-income families. The House’s total early childhood budget plan, which is primarily focused on early care and learning provisions, plus the voluntary pre-K program would cost about $1.4 billion over the next three years and $409 million in the current supplemental budget.

That’s not counting one major House proposal that’s different from the governor’s plan: a tax credit that gives families up to $3,000 for each child under 5-years-old. The program is capped at $7,500 per family and would cost $182 million in the current fiscal year and $377 million over the following two years.

State Rep. Dave Pinto
State Rep. Dave Pinto
In an early April press conference at the Capitol, Rep. Dave Pinto, a St. Paul Democrat who chairs the House’s Early Childhood Finance and Policy Committee, said the state was quick to spend public money on child care early in the pandemic and has kept providers better than other states as a result.

“Getting young kids off to a great start is the very definition of a public good, which needs ongoing public support,” Pinto said. “It allows parents to work, employers to hire and communities to thrive now and into the future.”

Senate GOP leans in on tax credits

The Senate GOP, by contrast, has no new spending on child care programs. 

Sen. Jim Abeler, a Republican from Anoka who chairs the Senate’s Human Services Reform Finance and Policy Committee, argued the child care sector in Minnesota is stabilized, noting the huge amount of public money already spent on the industry.

State Sen. Jim Abeler
State Sen. Jim Abeler
Abeler said both the state and the federal government “heard the problem and responded to it” during the pandemic. And while he said that’s proof the Senate GOP has been interested in helping the industry, Abeler said child care providers shouldn’t get used to relying on public subsidy to stay open.

He also said he believes boosting CCAP rates — which were raised significantly already in 2021 — helps some providers stay open, especially larger child care centers, but doesn’t help families afford the service. Many Republicans, including Abeler, have been more focused on trying to ease regulations on the shrinking number of smaller in-home child care providers, which are more common in Greater Minnesota.

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Abeler has unsuccessfully tried to raise the limit on the number of kids workers can look after — which would help businesses make more money. Regulators and Democrats generally have resisted increasing staff-to-child ratios, saying it could be less safe or result in lower-quality care and learning. Abeler also proposed tweaking a formula for stabilization grants in a way in-home providers say would help them financially.

More than anything, Abeler said he’s targeting money on “critically urgent” problems, namely, helping to ease major staffing shortages in the long-term care workforce; the Republican-led Senate has proposed spending about $1.5 billion on the issue. The GOP also wants to use much of the surplus on large, permanent tax cuts, including a reduction in the first-tier tax rate.

The GOP estimates a typical family making $100,000 would get $1,064 in savings each year under their tax plan. “Every year of reducing taxes is a good way to help people enjoy their own money and live within the means that we have,” Abeler said. Walz has proposed one-time rebate checks for many Minnesotans worth up to $500 for individuals and $1,000 for couples.

Pinto made the case in an interview Friday that the long-term care sector and much else rely on child care — both to support parents working in long-term care and to raise the next generation of workers. Failing to invest now will create problems down the road, he said.

Abeler said if he had $100 million, $500 million or $1 billion to work with he’d still spend it on long-term care. “Someone may well think that child care — what the (DHS) commissioner calls the ‘support behind the support’ — is the most critically urgent thing. Well, we’ll have to have that debate.”