Report dives into ongoing child care crisis
Child care has been a critical problem that Gov. Josh Stein is attempting to address through a March executive order.
Stock photo
The child care industry has been sounding the alarm for years now, but with federal stabilization grants drying up a few months ago, what was for many a smoldering problem has become a five-alarm fire.
With this in mind, Gov. Josh Stein issued an executive order in March creating the North Carolina Task Force on Child Care and Early Education, headed up by Democratic Lt. Gov. Rachel Hunt and Republican Sen. Jim Burgin. On June 30, the task force published an interim report with an introduction addressed to Stein that says more attention must be paid to several “significant challenges” in the industry lest the problem become even worse.
“These challenges are not insurmountable,” the introductory statement reads. “North Carolina’s legacy of tackling big problems with public and private solutions positions our state to lead the way in child care and early education once again. With grit, collaboration, and a vision of a brighter future for children and families in mind, we can get there.”
According to the report, the need for childcare far exceeds the availability of providers, with about one child care center for every 100 children up to age 5, and there is only one licensed child care slot available for every five families that need one.
The report claims that at an average annual cost of $11,720 per year, child care costs are unaffordable for most families in the state.
This creates problems not only for families looking to find care for their children but also the state’s economy as a third of respondents to a 2023 North Carolina Chamber Foundation survey indicated they had turned down a job opportunity or promotion because of child care challenges. More than a quarter of respondents said the challenges caused them to leave the workforce. According to the report, child care issues result in an estimated $5.65 billion annual loss for the state’s economy, and unplanned worker absences due to childcare challenges cost the state an estimated $1.36 billion in tax revenue per year.
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Sheila Hoyle, the interim executive director for the North Carolina Early Education Coalition, helps lead the way influencing policy on behalf of the childcare industry. She said that many young families can’t enter the workforce unless they have access to this vital service. In addition, a lack of child care hurts the next generation of workers during their most formative years.
“We know from what we understand about child development that one thing that gives children the best chance of having success in public school is that they have a good early learning experience,” Hoyle said.
To make matters worse, government money meant to bolster child care employee wages has dried up. Funding provided from the American Rescue Plan Act kicked in October of 2021 but ran out June of last year. While the North Carolina General Assembly passed funding for stabilization grants to make up for some of those losses suffered by child care centers, those grants ran out in March.
With that, even as cost of living continues to rise, many early childhood educators, even those with degrees, saw a pay cut, and there isn’t any indication that money is coming back any time soon.
The task force report notes that in 2024, 60% of child care center directors, owners and operators reported they were experiencing a staffing shortage. Part of the reason for that is that early childhood teachers haven’t been paid enough — even while the extra funding was in place — to make ends meet. As of 2023, workers were paid an average of $14 per hour, about half the state’s median hourly wage.
Mary Moody runs the Silver Bluff Kids Early Learning Center on the Silver Bluff Assisted Living Facility property in Canton, which is licensed for 54 children and currently has 50 enrolled. Mary has 12 employees, most full time. She said that in the 21 years she’s owned and operated her center, it’s never been a “money making business,” but that since the grant funding has gone away, things have gotten worse.
“It all comes back to the fact that there’s just not enough money coming in to pay us for the true cost of care for the children,” Moody said.
Moody said that when an employee does leave, she understands why. A report published last year by the Center for the Study Care Employment found the median wage for child care workers in North Carolina to be $11.69, and 43% of households where someone is employed in the industry participated in safety net programs to the tune of $122 million total. Unless someone is passionate about being a caretaker, there just isn’t much incentive to seek those jobs. Hoyle agreed with Moody.
“Our wages are low in child care, and we also know that our fees for parents are already higher than most families can afford, so we wind up with pieces of our system working against each other,” Hoyle said. “I would identify the financing of child care programs as the major issue that that we’re struggling with today.”
Industry-wide, along with pay issues, Moody said there has been a higher burnout rate among those who enter the profession. According to Moody, providers have encountered higher workloads with more children under their care at one time and a “major increase in behavioral problems.” According to Southwestern Child Development Commission Executive Director Mandy Mills, the burnout rate may just get a bit worse, too, considering Stein last month signed into law a bill that allows for larger overall classroom sizes. This means that, while minimum student-to-teacher ratios remain the same, if there is more than one teacher in a room, they can pack more children in.
“It’s just going to be a really big sensory issue, packing all those kids together,” Mills said, adding that this has a negative affect on both children and teachers. “Think about having 15 one year olds in one classroom.”
The Southwestern Child Development Commission partners with childcare providers to administer subsidies, offer referral services and provide training and resources. It serves 14 Western North Carolina counties. Mills said that Moody is somewhat of an anomaly in the industry as she’s enjoyed a strong employee retention rate. With that lack of turnover, despite what Moody still considers pay below what her staff deserves, the stability has created for her a good reputation in the industry. While Moody was humble about her center’s relative success at keeping employees, Mills was more blunt in saying that reputation is earned simply because Moody is a competent and attentive leader whom people want to work for.
“With Mary, the quality is there,” Mills said.
Mary Moody’s Haywood County child care center has about 50 children enrolled. Donated photo
However, many places end up having to hire “the best they can get,” which often ends up being people with little relevant training or experience. Mills said that one facility in The Smoky Mountain News coverage area that she declined to name had six teachers and lost five all at once. The morning something like this happens, when parents bring their kids to the center, they are informed that there is no one there to take care of them. Sometimes, places permanently shut down all at once, leaving parents without any short-term care.
“I’s nothing for a center to call and say we’re shutting down,” Mills said. “I mean, it’s kind of like the norm now. We’re like, who’s still open?”
One of the key findings of the task force report is that rural child care providers experience greater financial strain because the ratio of overhead to revenue is lower for facilities with fewer children. They also miss out on additional subsidy reimbursement revenue because of their physical locations — basically, under the current system urban counties, despite having similar costs of doing business, receive greater subsidies.
Subsidies reimburse providers for services delivered to low-income families. In North Carolina, the amount child care providers are reimbursed for the care and education they deliver to children in the subsidy program is based on their local market rate. The majority of funds that come into North Carolina for child care cover from the federal government and go to the Division of Child Development in Raleigh before being allocated to the 100 counties.
The North Carolina General Assembly sets the state’s child care subsidy reimbursement rates at the 75th percentile of the market rate in each county. According to the North Carolina Department of Health and Human Services, the state has more than 3,000 different child care subsidy reimbursement rates, with different subsidies paid to child care providers depending on its county, ages of the children, setting (center or home-based) and star rating of the program.
Each county has a market rate established by a provider survey.
Those in the industry SMN spoke with said there are flaws in that survey that favor urban counties and lead to inequities in rural areas. The solution many propose to address this is for the government to establish a child care subsidy rate floor. The task force report recommends a minimum subsidy rate based on the state’s average market rate, which would bring underfunded counties up without any negative effect on larger counties with higher market rates and prevent further closures in already underserved rural areas.
“This would help ensure that child care programs in all 100 North Carolina counties receive a minimum child care subsidy reimbursement rate without penalizing counties that already receive subsidy reimbursement at rates at or above the floor,” the report reads, adding that a rate floor would also enable providers to payer higher wages, the benefits of which will be seen throughout the state’s economy.
Hoyle echoed that sentiment.
“Years ago, there was belief that it costs more to do childcare in an urban area,” Hoyle said. “What we are finding out today that that’s not true, that urban costs may actually be higher because childcare is a program that depends on volume of scale.”
Hoyle said that with the establishment of the rate floor, Moody, for example, could see an increase of up to $400 per child per month.
“Getting that right floor would allow me to increase the teachers’ wages to where they could get living wages,” Moody said. “But the other thing is, our staff need health insurance. That’s another thing, is that a lot of them leave burnout from centers because they can’t afford to take care of their own health, and so they’re jeopardizing their health by continuing to work in childcare centers.”
During the task force’s June meeting, several other recommendations were made. One was that that state government could make it easier for child care providers to provide employees non-salary benefits to make them competitive in the broader labor market.
Along with recommending that the state explore partnerships with its university, community college and public school systems, another proposed solution is to allow for people who work in child care to have their own children’s care subsidized, a program several states have already adopted with differing policies but similar positive results, according to the task force report.
In addition, the report recommends creating an endowment to help meet low-income families’ child care needs by leveraging public and private dollars to set up an investment fund, the interest of which can be used for state child care needs.
“While an endowment can be created with solely public or private dollars, this tool functions best as a public-private partnership that utilizes matching grants to ensure dollars stretch further,” the report reads, noting that other states, such as Nebraska, Connecticut and Montana put this into practice in different ways, each successful.
According to Hoyle, the possible solutions all boil down to an increased financial stake from just about everyone — state and federal governments, employers and the parents themselves — although at this point it appears that the task force solutions place the onus almost entirely on the state government. While there is much work to be done, Hoyle said she has been happy to at least see a modicum of progress across the board.
“I think the thing that I am most encouraged about right now is that this year we have seen movement from both the economic sector, from parents who are saying the same song, and certainly from government that has said, ‘we have to work on this issue,’” Hoyle said.
For those dealing with these issues day to day on the ground level, while progress is great, further action is necessary to save many who have made a life in this struggling industry.
“They love being here, but it’s a lot of responsibly,” Moody said. “They see a sign that says, ‘Now hiring’ for $19 an hour to hand somebody coffee out a window and take their money, and that person’s going to get paid more than they are getting paid to take care of 10 children. So that’s what they’ll do.”
