Newsom's Proposed Cuts to Child Care Rates Have Advocates Worried

Child care provider Pat Alexander has hung onto her in-home child care center during the COVID-19 pandemic, but just barely. Alexander was caring for 13 kids in her Elk Grove home in Sacramento County, but now she's down to three. So far, she's survived the hit to her income. But a proposed 10% cut to the amount of money the state gives her to care for children from low-income families would force her to re-evaluate her business.

Gov. Gavin Newsom has proposed the cut as part of his plan to close a $54 billion deficit brought on by the COVID-19 pandemic. But Alexander said the rate she gets from the state is already lower than what she charges her other families.

“I've always operated with the subsidy families and low-income families and always worked with them," she said. "And now, if they do this 10% cut, that's a big chunk of money and it adds up. My cost of living didn't change. It didn't go down 10%.”

Alexander said if the cuts go through, she may have to stop taking families who pay with subsidies. That’s exactly what advocates are worried will happen. Kristin Schumacher, a senior policy analyst with the California Budget and Policy Center, said child care providers operate on razor-thin margins. And because of social distancing and increased cleaning expenses, it's costing more to take care of fewer kids.

"It's really put a crunch on their budgets. And for some, it's going to be untenable," Schumacher said. "They're not going to be able to cover their operating costs and remain open. And so we may lose providers in the subsidized system as a result.”

There are already roughly 1.8 million children in California whose families qualify for state subsidies but can’t find a spot. That may be one reason why the governor’s proposed rate cut has been met with resistance from state lawmakers. The Senate Budget Committee rejected the changes. 

Assemblyman Kevin McCarty, D-Sacramento, said the rate cuts could hurt the entire economy.

“People that work in this field would potentially lose their livelihoods, lose their jobs," McCarty said. "More importantly, we lose places for people to send their kids so they can get back to work. How can people get back to work if they have no place to send their kids during the day?”

Margot Grant Gould, policy director for the First 5 Association of California, said California had gone through this before during the Great Recession.

"We lost a number of child care providers because they simply weren't able to stay in business for these exact reasons," she said. "And we are concerned about what this will look like coming into our COVID-19 recovery and in the recession that we're currently in at this moment in time."

Grant Gould said Newsom's proposal does continue to support child care in some areas, including stipends for providers and money to help cover COVID-19-related costs. But she said cuts to provider rates would undermine an already very fragile system.

Newsom’s proposal calls for the cuts to be eliminated if the state receives more financial assistance from the federal government. Lawmakers must pass a balanced budget by June 15.