Child care centers took a big hit with state rate freeze, study says

2013-11-18T07:30:00Z Child care centers took a big hit with state rate freeze, study saysDOUG ERICKSON | Wisconsin State Journal | | 608-252-6149

A state program that helps low-income working families afford child care is falling far short of keeping up with real-world costs, according to a new study.

The analysis by the Wisconsin Council on Children & Families blames the gap on a seven-year freeze in state reimbursement rates to child care centers that participate in the subsidy program, called Wisconsin Shares.

“This has serious consequences for programs and parents,” said Dave Edie, a policy analyst with the organization. “For programs, it means they have a hard time covering their costs. For parents, it means they either are forced to pay much more than they can really afford or look for lower-cost care, which often isn’t nearly as good.”

The analysis found that only 23 percent of the child care slots available in the state are priced at a level that would ensure coverage through Wisconsin Shares. Put another way, that means 77 percent of the time, the state reimbursement rate, which includes a co-pay from the parent, does not cover what the market is charging to care for the child, said Edie, who led the state’s child care office for years.

Joe Scialfa, a spokesman for the state Department of Children and Families, which administers Wisconsin Shares, said help is on the way. The rate freeze was lifted in the 2013-15 state budget, and select providers in 18 counties already have had their reimbursement rates increased, he said.

Those providers were chosen because they were experiencing the largest discrepancy between market rates and reimbursement rates, Scialfa said. Dane County is not among the 18 counties. Another rate increase will occur Jan. 1 for centers rated highly through the state’s YoungStar rating system — an incentive for centers to improve their quality, he said.

Wisconsin Shares pays part of the costs of child care for low-income working families who qualify. Parents pay a co-pay based on their income.

The program began as part of former Republican Gov. Tommy Thompson’s welfare reform efforts.

“Thompson decided that if you’re going to require folks to work, especially single mothers, you had to be fair enough to help them cover the major costs of child care, or else they’d be going backwards financially,” Edie said.

The state subsidy and co-pay together are intended to cover a center’s cost to care for a child. In 2005, the year the freeze began, the reimbursement rate covered 75 percent of the available child care slots. That’s the figure that now has dropped to 23 percent.

If the reimbursement rate had kept up with market rates, child care centers in Dane County that serve poor children would be getting $3,450 more per 2-year-old per year in state subsidies, the study found.

“That’s the dilemma child care providers face,” said Mary Madsen, president of the Wisconsin Child Care Administrators Association. “Those rates were frozen for seven years, but our costs kept going up.”

Some child care providers eat the difference or negotiate a higher co-pay with parents, she said. But in some cases, either the parent or the child care provider can no longer afford to participate in Wisconsin Shares, she said.

Scialfa said the freeze began under former Democratic Gov. Jim Doyle.

“The Department of Children and Families and Gov. Walker understand that this has had an impact on the working families who rely on the Wisconsin Shares subsidy to find the best possible child care providers for their children,” Scialfa said in a statement. “This is why Gov. Walker approved an elimination of the rate freeze in the 2013-15 budget.”

In total, the budget provides an additional $5 million in fiscal year 2015 for broad rate adjustments, he said.

Edie said the lifting of the rate freeze is good news. However, he said the additional money will mean about a 2 percent increase in rates overall.

“To really fix the rates, you’d need an additional $30 million to $35 million a year,” he said. “So while it’s helpful, it’s really a small piece of getting back to a normal approach.”

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