Lawmakers consider long-shot $2.3 billion proposal to keep struggling child care providers afloat

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So many dreams are on hold for Delia Vazquez’s young family. Home ownership. A second child. Financial stability.

What’s holding them back is the extraordinary price of child care for their five-month-old son — at more than $1,300 per month, it’s equal to the rent at their Manor residence.

Vazquez, 30, teaches fourth grade in Austin while her husband works as an audiovisual technician. Together, the couple make too much to qualify for state and federal financial assistance.

To help out, relatives have flown in from Vermont, staying a month at a time, to help look after their baby until Vazquez’s school goes on summer break. But the fall looms with no sustainable solution.

“If we can’t find something by then, I don’t know what we’re going to do,” Vazquez said. “It’s very difficult.”

Vazquez’s situation is far from unique and is made tougher with fewer day care choices now than before the COVID-19 pandemic ravaged the struggling industry in 2020. Child care providers and advocates say child care in Texas can’t recover without help from the state.

There’s an attempt to do that this legislative session: a $2.3 billion proposal to help revive the already fragile industry as federal aid mobilized by the pandemic expires later this year.

The budget request, tucked inside the 2024-25 spending plan currently being negotiated by House and Senate lawmakers, comes from state Rep. Armando Walle, D-Houston, and would provide a direct-to-provider payment of about $1,000 per child per year, based on the number of children a day care facility is licensed to serve.

The funding would go to the state’s more than 13,000 licensed child care centers and family child care homes — run by about 6,600 licensees across the state — and is intended to support operational costs, recruitment and retention efforts. Providers say they hope to use it to help raise the average wage of staff and educators from $12 per hour to at least $15 per hour.

If approved, the state money would replace federal funding that the facilities had been getting. Since 2020, more than $4 billion in COVID-19 relief funds went directly to 10,790 Texas child care providers in 85% of Texas counties to help cover costs for an estimated 836,000 children, according to the federal Administration for Children and Families’ Office of Child Care.

Whether the new state funding will wind up in the next two-year state budget, expected to total more than $300 billion when it passes later this month, remains to be seen.

Legislative budget negotiators are navigating several potentially explosive disagreements on other issues between the House and Senate proposals while juggling nearly $200 billion in requests for general revenue — far more than the law allows them to spend. A budget compromise is expected to be presented to both chambers for a vote later this month.

So far, the request has been relegated to an unfunded “wish list” section of the budget, open to negotiation but not included, so far, in the bottom line of either budget proposal.

Walle, a member of the House Appropriations Committee, knows that the competition is stiff, even as the state enjoys a historic budget surplus.

“I’m going to make the case,” he said. “There’s a reason why we have a surplus. Part of this surplus is due to high inflation, and because our economy is based on consumption, sales tax is a primary driver of our budget. What we’re trying to do is allocate those dollars to the folks most in need, the people that need the help.”

When the pandemic began three years ago, the state ordered day cares to drop to 50% capacity, and half of providers’ income evaporated, said Tim Kaminski, director of operations for Gingerbread Kids Academy and Gingerbread After School Programs, which has seven Texas locations in Fort Bend County.

By the time federal day care funding expires this November, more than $6 billion will have come to Texas for day care facilities and state funding programs. Child care centers each received an average of $303,500 over that time, and child care family homes received an average of $24,900, according to the federal Administration for Children and Families’ Office of Child Care.

The Texas Workforce Commission, which administers both state and federal child care dollars, has spent $850 million of that money for child care financial assistance for parents, $234 million to support child care expansion initiatives and $155 million for various projects to improve the quality of child care, including the development of new registered apprenticeship programs for child care work and expanding professional development scholarship for child care workers.

When providers were allowed to return to full capacity, they had fewer customers and staff, said Kaminski, a member of a statewide group of child care community stakeholders who are working to find solutions to the child care crisis in Texas.

The relief funds were a lifesaver, Kaminski noted, adding “but we’re not past the COVID impact.”

“There is no other way for the Texas Workforce Commission to financially help stabilize the child care industry over the next two-year period,” Kaminski, a Republican, wrote in an April letter to Republican state leaders last month urging them to support the allocation of state dollars. “We will continue to lose more child care programs which will have a negative impact on the Texas workforce and the Texas economy.”

The lack of access to child care already disproportionately affects women and people of color, who compose the majority of child-care facility owners and staff in Texas, Kaminski said.

Women also made up the majority of essential and front-line workers during the pandemic, many of whom could not do their jobs remotely and who needed child care more critically than those who could work from home — another reason the closure of more programs would disproportionately affect them, he said.

The problem is not unique to Texas, as providers in states across the country face the same expiration date on their federal funding. On Monday, some 700 child care providers nationally, including dozens in Texas, shut their doors for a “National Day Without Child Care” demonstration to drive home the depth of the crisis.

The rally comes as Congress considers cuts to child care funding and lowering the number of children from low-income families who can get subsidized child care. In April, President Joe Biden signed an executive order with more than 50 directives designed to make child care cheaper — but with no additional funding attached.

In Austin on Monday, providers and families rallied on the steps of the Texas Capitol, pleading for lawmakers to step in with state dollars.

“We need our lawmakers to stand up for our children,” said BriTanya Brown, owner of Our Loving Village Child Care and Doula in Stamford, a rural community about halfway between Fort Worth and Lubbock. “America, we are watching as you fail our families.”

Without funding to replace the federal relief dollars, up to 44% of child care centers in Texas could close their doors, according to a survey this year by the Texas Association for the Education of Young Children.

“It’s the reality,” said Stace Jones, CEO of Christian Preschool Centers, which has 12 locations in Lubbock and Amarillo, and president of the Texas Licensed Child Care Association. “What we’re asking for is two years to continue helping us stabilize while we come up with better, longer-term solutions. Something’s got to give. We have to come up with something.”

Dropping enrollment, rising costs

Child care facilities are struggling to meet rising costs — such as an average 37% increase in payroll — as families strapped by inflation are unable to pay higher tuition to meet those needs, owners and advocates say.

An inability to pay staff adequately makes it impossible to keep a full staff of workers to meet mandatory staff-to-child ratios, so about 79% of Texas child care providers aren’t running at full capacity right now, the survey said.

Meanwhile, more schools are offering free preschool programs for children as young as 3 years old, pulling those children out of paid or subsidized child care.

“Financially, you can’t support a child care program just with infants and toddlers,” Kaminski said.

In 2020, the property value of one Gingerbread location in Fort Bend County increased by about half a million dollars in a single year, Kaminski said. In 2022, the valuation increased another $400,000, he said. The tax bill for last year for that single facility was $50,000, he said.

“This year, it’s projected to go up another 20%,” he said. “Small businesses like ours can’t absorb that kind of increased operating cost when we can’t raise our tuition rates.”

Some 60% of Texas day care centers were closed in the first few months of the pandemic; three years later, about 27% of the state’s providers are still closed, according to a statewide work group report completed in December.

The rest are struggling mainly due to rising costs, including staffing costs, higher property taxes, increased rent and building costs, and a 30% increase in the cost of goods and supplies due to inflation and other factors, association officials said.

While Kaminski was testifying before Texas lawmakers in a committee hearing last month on a bill that would offer some property tax relief to facilities like Gingerbread Kids, he got a message on his cellphone. He checked it in the committee room.

“Another day care down the street from us was closing, and it had been open for the past three years,” he said. In Fort Bend, some 144 day care programs have shut down since the pandemic began, Kaminski said.

Walle’s funding request, listed as “Child Care Bedrock Funding,” is in a proposed budget rider for the Texas Workforce Commission’s budget. It’s a key recommendation to come from a work group created by state lawmakers during the 2021 legislative session.

At the time, the workforce agency was directed to strategize how to improve the quality of the child care workforce in Texas. That report was turned in to state legislative leaders last December.

The work group, which included child care owners and directors, advocacy groups and state agency and education officials, recommended in the report that the Texas Legislature “increase funding for child care to stabilize the market and ensure access to high-quality care” with retention bonuses, increased subsidy reimbursement rates and more subsidized slots for families to decrease wait times.

“This crisis affects more than just Texas families,” the report says. “Early childhood educators are the workforce behind the workforce, and child care is part of the infrastructure of the Texas economy that allows businesses to operate. Child care is a critical industry for the Texas economy, for families who need to work, and for healthy child development.”

According to the commission, 41,330 children were on waitlists for child care across Texas in December 2021. A year later, that number was over 60,000. Some 54% of Texas child care facilities have been forced to put families on waitlists because they don’t have the staff to operate at full capacity, surveys found. Vazquez, the Manor mom, said her options have been limited. She’s been on a two-year waitlist for a child care facility that they can afford. In the meantime, the cheapest she can find is about $1,300 per month — and that’s still too much. It’s an expense they’ll have to use their savings to pay for when their family is no longer able to help, and that puts on hold all kinds of plans.

“The cost would be like an additional rent payment,” she said. “It’s not just emotionally stressful, but also financially stressful because we’d like to be able to save to buy a house. But with it costing so much, I don’t know if we’ll be able to do that as soon as we’d like. We’d like to have more children, but I don’t know if we’ll be able to do that as soon as we’d like, either, because I don’t think we’ll be able to pay for both in child care at the same time.”

On average, a Texas family of four spends $18,000 per year on child care costs, according to a study by the Center for American Progress.

The child care budget proposal has the support of business groups, including the Texas Restaurant Association, which views the lack of affordable child care to be a critical workforce issue.

“Child care is particularly challenging for restaurant employees who often cannot work from home and need child care beyond the 9-to-5 window,” said Kelsey Erickson Streufert, the association’s spokesperson. “We cannot operate successful restaurants without successful employees, and so we need to help our employees access affordable, quality child care that works for their family.”

In February, 196 Texas business leaders asked state leaders, including Republican Gov. Greg Abbott, to invest in child care to keep the economy healthy — and to follow the recommendations of the work group, including Walle’s funding request.

“The U.S. Chamber of Commerce estimated in 2022 that the lack of affordable childcare costs Texas employers up to $7.59 billion per year in terms of increased turnover, increased hiring costs, and lost productivity due to their employees missing work to care for children,” reads a letter addressed to Texas leaders and signed by the businesses, which included venture capitalists, real estate agencies and banks. “The Chamber report clearly demonstrates that one of the best ways to ensure our continued momentum and economic strength is to invest in quality, affordable childcare.”

Tabbatha Compton, an Austin mom of two who used to work at a day care herself, said her family doesn’t use child care right now because it’s too expensive and because she can’t find a quality facility that she can both afford and trust.

If they could afford child care for their sons, ages 3 and 6, Compton, 37, said she could find work more easily — or better yet, utilize her yoga teaching certificate and start her own business.

“I could afford my own car, and not be a one-car family,” she said. “Maybe even pay off debt and not have to choose between groceries and enrichment. … I could stop being so burnt out. This kind of invisible strain puts pressure on parents.”

Jones, the West Texas and Panhandle child care CEO, expressed frustration that the time and effort put into the work at the Texas Legislature’s request is not being regarded more seriously.

“The work group spent over a year and thousands of hours and thousands of dollars doing that,” Jones said. “Why is it not in the budget? Now they’re not funding any of the solutions the work group came up with.”

Lawmakers are already adding $35 million in new child care money to the next budget cycle at the request of the state workforce commission — a required state match in order to draw down an additional $52 million in federal money. That money does not support the child care workforce directly but is spent on financial aid for families to afford child care.

If Walle’s proposal gets included in the budget, the work group can come up with a long-term plan to help the facilities stay open and return to pre-pandemic attendance and provider levels without needing the same level of funding from the state every cycle, said Kaminski, a member of the state work group.

Meanwhile, though, the fiscal cliff is imminent, providers say.

Most of the federal funds sent to providers over the last three years have been used for classroom and program supplies, wage increases and bonuses, and professional development for staff, the survey by the Texas Association for the Education of Young Children found earlier this year. According to the association’s survey, some 75% of providers said they’ll have to raise tuition, 55% said they’ll have to cut wages and 42% said they’d likely lose staff when the funding ends.

“We’re all worried,” Jones said. “Absolutely. I’ve talked to providers across the state, and they’re all concerned.”

Disclosure: The Texas Restaurant Association and the U.S. Chamber of Commerce have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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