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The success of a flourishing economy, community, and workforce is dependent upon child care that is both accessible and affordable. Yet the business model for providing child care services in Colorado has been strained for years, leading to an ongoing decline of both supply and access.
Consider the facts. From April 2018 to April 2021, a total of 913 child care programs permanently closed in Colorado but only 486 programs opened. As of the most recent data, Colorado has a child care gap of 94,887 children. This means that 38% of children in the state need a child care slot but their families cannot reasonably access one.
Without access to affordable child care, parents and, more specifically, mothers, are left with the difficult decision of continuing to work for a paycheck or staying home to care for their children. If Colorado’s May labor force participation rate of women was the same as it was before the COVID-19 pandemic, there would be 43,581 more women in the state’s workforce. While child care is not the only reason women are leaving the workforce, it is a significant one.
The Department of Health and Human Services recommends that affordable child care should cost no more than 7% of a family’s annual income. Yet Colorado families are spending closer to 18% of their annual income on child care, making Colorado the eighth most expensive state for child care in the nation. While affordability is an issue for Coloradan families, child care businesses are also struggling. Child care operators face high occupancy and fixed costs, leading to little to no flexibility in revenue generation.
Common Sense Institute’s partnership and collaboration with Executives Partnering to Invest in Children (EPIC) brought to fruition a comprehensive analysis of the razor-thin profit margins with which child care businesses have to work.
Like almost all industries across the state, the child care industry faces the challenge of workforce recruitment and retention. Since the profit margins are so thin, it is difficult for child care businesses to compete with other industries’ wages. Policymakers and business leaders should look for opportunities to reduce ongoing facility expenses, like commercial property taxes, rent, debt, and other taxes for child care businesses. Underutilized real estate owned by public entities, political subdivisions, and faith-based institutions may present an ideal opportunity for child care businesses to thrive.
Child care businesses are crucial for enhancing early childhood development by teaching social, emotional, and behavioral intelligence skills to children while their parents are working.
The financial barriers to entry for a child care business are substantial. The exploration of new methods to offer a co-signing or guarantee program could be beneficial to the child care industry and allow more businesses and programs to enter the market.
On top of the significant financing that child care businesses require to get started, the regulatory environment is difficult to navigate as well. Those looking to start a child care business are often discouraged by the hurdles they have to jump over to get the proper licensing and meet all requirements. State and local regulatory partners should explore ways to streamline the application, review, and approval processes for child care businesses. Providing a single point of contact who can serve as a navigator and liaison throughout the child care business process could simplify the struggles and potentially allow for more child care businesses to get started and prosper.
The lack of supply of child care slots and the inaccessibility to affordable child care is a significant issue for Colorado families and the economy. If the challenges plaguing the child care business model are not addressed, the current system that provides child care in Colorado communities will quickly lead to less access for fewer children and families. To become sustainable, the funding and regulatory environment governing the child care business model needs to be overhauled.
To read the full study, visit www.commonsenseinstituteco.org.
Common Sense Institute (CSI) is a non-partisan research organization dedicated to the protection and promotion of Colorado’s economy. CSI’s mission is to examine the fiscal impacts of policies, initiatives, and proposed laws so that Coloradans are educated and informed on issues impacting their lives.
Executives Partnering to Invest in Children (EPIC) is a group of prestigious business executives partnering to serve as the business community’s non-partisan voice for early childhood. As leaders in their companies and industries, EPIC Members are leaving a legacy of true impact and lasting change by leading efforts to build infrastructure and advance policies that support the workforce of today while developing the workforce of tomorrow.
Kristin Strohm is President & CEO of Common Sense Institute and Nicole Riehl is President & CEO of EPIC . 