$78 million boost to Missouri’s child care subsidy slated to reach providers next month

Child care providers who accept a subsidy from the state to serve low-income families will see a boost in payments next month, thanks to a $78.5 million funding increase approved by Missouri lawmakers earlier this year. 

The funding hike, included in the state budget signed by the governor, went into effect July 1. 

It won’t be reflected in payments to providers until mid-August because the state pays the subsidy retroactively, the month after services are provided.

Cortaiga Collins, the owner of Good Shepherd Early Learning Center in St. Louis and Good Shepherd Early Learning Center West in Warrenton, said she was “elated and relieved” to hear about the increase.

The majority of children at Collins’ center are low-income and receive state assistance.

“I’m hopeful that this is just the beginning of more public investment in early childhood,” she said. “I was very excited to see the difference — it’s a noticeable increase.”

The subsidy program is targeted toward encouraging child care providers to offer services to low-income and foster families. The increase in the reimbursement rate was part of Gov. Mike Parson’s legislative agenda seeking to improve access to child care around the state.

Almost half of all children in Missouri under the age of 5 — roughly 202,000 kids — live in child care deserts, The Independent and MuckRock found as part of a joint investigation called “Disappearing Day Care.”

A child care desert is an area with more than three children ages 5 and under for every licensed child care slot or no licensed slots at all. They exist in every corner of Missouri. 

Even in areas not considered deserts, where capacity looks plentiful on paper, many providers say waitlists abound, in part because providers struggle to hire staff. 

Providers often cannot afford to pay their staff more than near-minimum wage with the rates they charge parents. Yet parents can’t afford higher fees that would be needed in order to boost pay.

Casey Hanson, director of outreach and engagement at the child advocacy nonprofit Kids Win Missouri, said she hopes the rate increase will expand access to care. She said she’ll also be looking for whether it spurs “shifts in available capacity.”

The subsidy does not cover the entire cost of care: Parents often are required to pay the difference between what the state covers and the cost of tuition, but not all can afford to, Hanson said. If parents can’t pay, providers may lose money or opting to accept fewer children. 

Providers who serve mostly children on the subsidy, and/or who are accredited, also get an additional payment that is a percent of the base-level reimbursement rate — which will be higher because the reimbursement rate will be higher.

“Everyone’s kind of waiting until the payment hits in August,” Hanson said, “but people are really excited for what this can mean for programs.”

Staff compensation

As of June, roughly 23,000 children receive the subsidy in Missouri — a federal program, administered by states through the Child Care and Development Block Grant. Families apply for the state to directly pay a child care provider part of the cost of care. 

Only very low-income families qualify in Missouri, along with foster kids. In Missouri, the cutoff is 150% of the federal poverty line, equivalent to an annual income of $41,625 a year for a family of four. There is a benefits phase-out for those between 150% and 215% of the federal poverty level.

Missouri’s 2022 market rate survey, which asked providers what they charge, showed the state now pays providers at the 25th percentile toward the cost they charge, on average, for infant care, the 22nd percentile for 4 and 5 year olds, and 21st for school-aged children. 

The rate increase will bump the rates up to the 58th percentile across the board. Most advocates and providers frame the increase as substantial — even though it still is nowhere near covering the full cost providers charge, or what many see as the true cost of providing quality care.

Collins said she is hoping the increase allows her to raise pay and attract qualified staff. She’s searching for seven staff members, which would enable her to serve around 22 more children.

“The lack of resources, the financial strain that was previously part of our program, made it difficult for us to incentivize being on our team,” Collins said. “Now with this increase I’m better positioned to adequately compensate my staff.”

Collins added, though, that the rate in Warrenton and rural Missouri more broadly, is still “excessively low,” and insufficient for providers to provide high quality care, and she hopes for “greater investment in the rural communities” in coming years.

The median hourly wage of a child care worker in Missouri was just under $12 in 2021.

Denise Wiese, former longtime director of Lemay Child and Family Center in St. Louis, who now sits on their board, said they have “several classrooms that are closed” due to lack of staffing, and are hoping to enroll around 47 more kids if they can hire new staff, spurred by increased compensation.

Wiese said that with the rate increase, the annual reimbursement the center will receive for an infant, as an accredited center in her area, will increase from around $12,700 to $22,300. Most providers, though, receive far less and will see a more-modest increase: Lemay’s reimbursement amount is at the high end based on the center’s geography, serving over 50% children on subsidy and being accredited.

“I’ve been with [the center] for over 20 years and I’ve seen very slow progress from the state, just supporting independent centers like ours, that serves such a high percentage of at-risk children,” Wiese said, “…But this is this is significant.”

The federal government recommends states pay providers at the 75th percentile of market rates, but few do.

Gina Adams, a child care policy expert at the D.C.-based Urban Institute said in an April interview that rate increases “give families more choice” — the state subsidy goes further toward the cost of the providers non-subsidy pay parents are accessing, although it doesn’t open up the entire market to them.

An increase in the reimbursement means parents “can go to a slightly more expensive provider who may have a slightly better quality care in their community, if that provider exists,” she said. 

“It’s important for parents to be able to do that…there’s always more to do, but we have to make progress where we can,” Adams said.

The increase is funded by one-time federal American Rescue Plan Act child care relief funds, Mallory McGowin, spokesperson for the Department of Elementary and Secondary Education, confirmed. 

Pre-k shifts on the horizon

The budget this year also included an expansion of state-funded pre-kindergarten targeted at low-income four-year-olds. There was an increase of $55 million for school-based pre-k, and $26 million for child care facility based pre-k. 

The priority for children in both programs is to serve those at or below 185% of the poverty line.

Hanson said because it is a grant-based process, it will take a few months before being rolled out. The school-based grants are now open to proposals, and the child care based grants will be open soon: McGowin said the state aims to announce the latter grant in early August and award them in September. 

Parson also advocated for a set of tax credits designed to help the child care industry, but the legislation did not pass this session.