Special Reports

Operators: State subsidy drives families into low-quality day care

Day care providers say the state of Georgia is depressing the day care market and leaving poor families with no choice but to attend the worst day cares.

The state pays most of the cost of day care for eligible low-income families by directly reimbursing the day care provider. The state sets that reimbursement payment based on geography and a study of day care rates in the local market.

Federal rules require that the state survey the day care market every two years, but Georgia last conducted a survey in 2005 — and last increased its reimbursement in 2006.

Congress is now considering a large increase in child care assistance funding. Day care owners say the state should use any new funding to increase its reimbursement rates.

Since most day cares try to set one fee for all customers, the state’s low reimbursement rate can essentially keep the price of child care lower for all families. And lower payments leave more money in the pot to serve a larger number of low-income families.

On the other hand, it also keeps quality lower because day cares have less income to invest in better-educated teachers, replenish materials and supplies and buy better equipment, argues Scott Cotter, the president and CEO of the Columbus-based Childcare Network chain.

“Georgia is by far the lowest reimbursement state I operate in,” said Cotter, whose business operates 163 day cares in eight states. “I feel like I’m operating a different business in Georgia because of the choices I have to make.”

For example, Cotter said, in North Carolina it would be unusual for day care centers to combine classes at the end of the day. But that’s common in Georgia because it allows day cares to send some teachers home early instead of paying them for more hours.

“It’s not the best practice by any stretch of the imagination,” he said. “When you pick up your child, you see a person who hasn’t been with your child all day and knows nothing about how the child’s day went.”

North Carolina and many other Southeastern states encourage better practices by offering higher quality day cares a higher reimbursement rate. In fact, two-thirds of all states do this, according to a 2009 National Women’s Law Center report. Georgia does not.

Day care owners’ biggest single expense is staff salaries, and the minimum wage has increased since 2005, Cotter pointed out. In addition, the state is adding new educational requirements for day care teachers, which may eventually drive up salaries further.

Cotter, who is also vice president of legal and legislative affairs for the Georgia Child Care Association, said day care owners can’t afford these increasing expenses with frozen payments from their single biggest customer. He estimated that the state subsidy makes up 30 to 50 percent of day cares’ incomes.

The recession has caused day cares to lose a significant number of their private paying customers, Cotter said. “By default, we’ve become more highly subsidized.”

At some day care centers, 95 percent of the children receive subsidies, said Carolyn Salvador, executive director of the Georgia Child Care Association.

“How can they ever get extra money to pay staff or buy better supplies? And God forbid a bus breaks down or the air conditioning blows,” she said. “Centers that are catering to low-income families have a suppressed market rate and certainly don’t have any money to increase the quality of their programs.”

Tony Foskey, vice president of the Warner Robins-based Children’s Friend chain of day cares, expressed some frustration that the state has focused on improving quality without addressing its own role in funding. State reimbursements in rural areas and small cities such as Dublin are so low, “It isn’t enough to run the worst of the programs,” he said.

The federal government recommends that states reimburse day cares at 75 percent of the market rate, meaning that families receiving subsidies would be able to choose from about three-quarters of the day cares in their area.

But Georgia sets its reimbursement rate at just 50 percent of the market rate. Fewer than half of the states had reimbursement rates that low in 2009, according to the National Women’s Law Center.

And the lack of a recent Georgia market study means the current reimbursement doesn’t reflect the last five years of inflation. Cotter estimated that the state’s payment today probably gives families access to only about a fifth of the day cares in their area.

“The state is forcing this consumer into lower-quality settings,” Cotter said.

To contact writer S. Heather Duncan, call 744-4225.

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