Could new funding lead to something 'dynamic' on the child care front in Crookston?

Mike Christopherson
Janelle Berhow is pictured this week with some of the children in her care at her child care business, “Gotta Love Kids” that she and her husband, Mark Berhow, opened earlier this year in downtown Crookston, in the former longtime location of New Paths Area Learning Center in the northwest corner of Downtown Square. Although because of Crookston’s continued child care shortage many assumed the new child care operation would have a full roster of kids from day one, Janelle says she won’t be full until May. The greatest need for licensed child care slots in Crookston is for infants, she adds.

At a recent Crookston City Council strategic planning discussion, which, not surprisingly, focused a great deal on the shortage of licensed child care in the community, the word “dynamic” was uttered, as in, the City needs to display “dynamic” leadership that leads to doing something “dynamic,” such as constructing new or renovating an existing building into a child care center.

Could such a dynamic local initiative receive a dynamic funding boost as a result of a dynamic investment in child care in greater Minnesota by the Minnesota Legislature this year?

It’s definitely possible, says executive director of the Greater Minnesota Partnership, Scott McMahon, because money is available in St. Paul that hasn’t been available before. 

“We have renewed hope,” he said.

This chart submitted by the Greater MN Partnership lists the number of licensed child care slots currently needed in Crookston and other cities in the region.

Told that the local child care shortage moved to the top of the priority list among City and community leaders around five years ago, McMahon said the Crookston timeline “lines up almost perfectly” with the “a-ha moment we had across greater Minnesota over the past five years.”

That moment coincided with a realization among leaders and decision-makers throughout greater Minnesota, he explained, that the child care shortage is “no longer just about a transaction between a family and a (child care) provider, it’s much more community-based.” And in communities across greater Minnesota, McMahon said in a Zoom interview with the Times, employers and chambers of commerce and elected officials and educators all realize that having a sufficient amount of licensed child care is “critical” to a community’s success. And as time passes and the problem persists or even gets worse, it starts to do more than hinder a community from growing, it can actually lead to some back-sliding or regression.

“It seems like it’s a different conversation now, but it’s still not an easy one,” McMahon said. “But at least it’s happening.”

Show me the money

The “crux of the problem” currently for child care providers is that it’s hard to generate enough revenue to make their business model work, McMahon said, and it eventually gets to the point that going to work at the local convenience store “looks much more (financially) attractive.”

The revenue model that stacks the deck against providers hoping to make a living in recent years has resulted over the years with thousands of home-based child care providers leaving the industry, and the result has been the child care crisis hitting Crookston and other rural Minnesota communities. Openings of new child care “centers” has “made up some ground,” McMahon said, but not nearly enough.

But there is reason to be encouraged, he stressed, because legislators in St. Paul are not only discussing the state’s child care shortage, there is new money available to have address it in significant fashion. Not only is the state projected to have a surplus of more than $1 billion, McMahon said, $524 million from the federal recovery act allocated to Minnesota is dedicated to child care. Of that money, $200 million is set to go into a block grant program for child care subsidies, assistance, and things like early learner scholarships. And $320 million is targeted at provider-focused grants.

Working with the Coalition of Greater Minnesota Cities, the Greater Minnesota Partnership is seeking legislation in 2021 that will expand child care offerings in rural communities across the state.

Being proposed are:

• Minnesota Initiative Foundations Child Care Grants: Provides funding for community planning coordination, training, and education necessary to expand child care access. The money will be used to help child care providers with business improvement planning, quality mentoring and workforce development to stabilize the child care provider marketplace in Greater Minnesota. Amount seeking from Legislature: $4 million

• DEED Child Care Grants: Provides funding for child care business start-ups or expansions, trainings, facility modifications, child care employee retention grants, and licensing assistance. Amount seeking from Legislature: $10 million (at least 50% dedicated to Greater Minnesota)

With an estimated shortage of 39,000 licensed child care slots throughout greater Minnesota, many communities are talking about opening centers more than encouraging more home-based operations to open. But it costs a lot of money to make such a development a reality, so the GMNP and CGMC are seeking funds from the legislature on the facility-level as well.

• Fund the Greater Minnesota Child Care Facilities Capital Grant Program: This program, established but not funded in the 2020 capital investment bill, provides grants of up to $500,000 to local governments—cities, counties or school districts—in greater Minnesota to fund up to 50% of the costs to build, upgrade, or expand child care facilities to increase capacity and meet state requirements.

• State Investment: The GMNP and CGMC are seeking $10 million in general obligation bonds and a $10 million general fund appropriation that will be matched by $20 million in local funds.

• Eligible Projects: Every community has space that can easily be converted into a child care center. Examples may include:

• Cities - Grants could be used to build new infrastructure, rehabilitate a vacant building, or repurpose space in an existing community center.

• Counties - Rooms in a nursing home could be converted into child care, a model that has proven to be beneficial for both children and nursing home residents.

• Schools - An unused wing of a school building could be renovated for child care.

This graphic shows the total number of licensed child care slots in greater Minnesota. The Greater Minnesota Partnership says the total shortage in greater Minnesota is an estimated 39,000 slots.

“The first challenge is, how do we create opportunities to build and maintain successful (child care) businesses, and the second challenge is expanding access to capital,” McMahon explained. “When the business model is broken it’s impossible or next to impossible to build a profitable business because you can’t access the capital in the private market to build out infrastructure. You talk to providers, they say they can build a business model where they either pay their mortgage or their staff. They can’t pay both. If we can move some of that off their balance sheet, that could be big.”

Then there’s the changing child care landscape, he continued, in which most people interested in being child care providers don’t want to operate out of their home. That’s why the GMNP is especially promoting the benefits of the “pod model” that would have individual providers saving money by having to purchase a less expensive family child care license, but then sharing a larger space with other family-level providers, while having their own space within that larger space. In Crookston, for example, the former junior high school and gymnasium downtown have been mentioned over the years as a potential location for a pod-type of child care operation, but the up-front costs necessary to renovate the space have been too prohibitive.

“You put three to five family licenses in a shared space, that’s attractive to people, and there are opportunities in every community, with vacant buildings that haven’t been used for some time,” McMahon said. “With new capital, we can incentivize some of these opportunities so they actually happen. People would have a place to go and build the business they want. They’re being held back now.”

The GMNP and CGMC see real opportunity in the pod model, McMahon stressed. The agencies think it will be a big part of the “greater Minnesota solution.”

Other discussion/debate topics

Asked how often the supposedly overburdensome child care regulations are cited by legislators in St. Paul as another major part of the problem, McMahon said it largely depends on which side of the aisle is speaking. One side of the aisle says it’s the regulations, he said, while the other says a lack of funding is the most urgent problem.

While acknowledging that some especially tight regulations are an issue, McMahon said most regulations exist to create safe child care environments. The regulation that impacts providers the most financially, the one that limits the number of children a single provider may care for, exists to maximize safety.

“If you’re a single provider with a family license, you’re capped at 10 kids,” he noted. “Do we really want to focus our efforts, from a safety standpoint, on that one person being allowed to take care of 12 or 14 kids?

“We need to have a balance between safety and burdensome regulations,” McMahon added.

He also acknowledges that some regulations related to licensing are perhaps more punitive than they need to be, and less supportive in nature.

McMahon sees funding as the more urgent issue, whether it’s the costs to open a child care business, the fees providers are able to charge families and still be competitive, or the wages that child care staff are paid. Whether it’s a home-based operation or a center, McMahon said funding issues are by far the biggest hurdle in the way of success.

Janelle and Mark Berhow of Crookston in early 2021 opened their child care operation, “Gotta Love Kids” in the former longtime home of New Paths Area Learning Center in downtown Crookston. The general assumption, given the child care shortage in Crookston, was that not only would they have a full roster of kids from day one, they’d probably have a waiting list, too. But Janelle told the Times recently that she still had openings in the preschool and school-age groups, and that if she was allowed to care for more infants she would have been full right away. The biggest need by far in Crookston, she said, was for infant child care.

(Berhow has since told the Times that she will have a full roster of kids in May.)

McMahon agrees with Berhow’s assessment.

“Infant slots, that is the biggest barrier,” he said. “In far too many communities right now, if you want your infant to have daycare, you need to be on a waiting list before you’re pregnant.”

And yet, the biggest shortage area is also the least revenue-generating demographic for providers.

“We’re always saying in the child care world, when you look at the ratios you have for kids, you lose (money) on infants, you break even on toddlers, and you make money on older kids,” McMahon said. “So another challenge is to provide an economic incentive for providers to focus on older kids rather than infants. If we can shift the incentive structure to providers who bring in infants, we might see more opportunities to close that gap.”

Local investment necessary

Major employers, echoed by the Minnesota Chamber of Commerce, continue to reiterate that a shortage of child care in greater Minnesota communities is holding back business growth, which is holding back growth in those communities, McMahon said. So those businesses are willing to help out, whether it’s putting up some funding or turning an available space on their sites into a child care operation.

There’s no getting around the fact that, even with money in St. Paul available, local communities are going to have to come up with significant dollars if anything dynamic on the child care front is to come to fruition. In Mora, for example, the community received a $100,000 grant to build a child care center, but raised more than $800,000 in local contributions. In Willmar, the grant was $50,000, and again the community raised more than $800,000 for a child care center.

“What’s happening in Crookston, it’s happening in many other cities, but the Crookston solution will be different, it will be its own solution,” McMahon said. “What we want to do is give resources to communities to address their problems with local solutions.”

There are “some guard rails” regarding how some funnels of funding can be used specific to child care, but other funnels are more flexible, he said. The key is that much of the new money available now is one-time money, so it makes sense to invest it in these that don’t come with recurring costs.

“We need to find the one-time expenses that make the biggest difference,” McMahon said. “That means investing in infrastructure that supports a sustainable (child care) business.”

In the meantime, with Minnesota’s six initiative foundations playing a predominant role, the conversations on child care will continue across the state, amid the hope that the legislature this year does something dynamic on the child care front.

“When you look at the opportunities being made available by federal money coming in and how we turn those dollars into local solutions, we may have a situation that looks very different, three, four or five years from now, if we spend the money in highly transformative ways,” McMahon said.