Alaska child care providers struggle to stay open as pandemic-era relief funds dry up

With pandemic-era federal relief funds set to dry up at the end of the month, many child care providers in Alaska say they’re facing a stark choice: to significantly raise their rates or risk closing for good.

During the COVID-19 pandemic, when child care centers were dealing with closures, virus outbreaks and staff shortages, the federal government provided $24 billion to aid the sector via the 2021 American Rescue Plan. Alaska received over $95 million of those federal relief funds to support child care.

The federal funds, which were distributed in the form of grants, helped keep many centers afloat during the pandemic, according to Stephanie Berglund, CEO of thread Alaska, an early childhood nonprofit that manages and distributes federal grants and offers child care resources in the state.

The last and final round of grants went out in the spring. Berglund said most programs used the most recent round of funding to pay for staff recruitment and retention, pay their rent and mortgages, and other operating costs. But even with that help, many struggled to get by.

Many child care providers in Alaska have already had to close due to inflation and a business model that has resulted in extremely low wages, persistent staffing challenges and often unaffordable price tags for care.

In the last three years, 133 child care programs in Alaska have closed, including 34 in the past six months, according to Berglund. Just 62 new facilities have opened since early 2020 — a net loss.

The crisis is hitting parents and families who are struggling to find affordable care for their children.

Anchorage high school teacher Nora Matell’s child care bill for her two young children in September increased by nearly $1,000 compared to her August bill. With that increase, Matell said child care will now account for half of her yearly income: nearly $3,600 per month for full-time care.

Matell’s children attend Hillcrest Child Care Center in downtown Anchorage. Hillcrest’s director, Christina Eubanks, attributed the 23% fee hike last month — which shakes out to about $400 more per child — to the end of the federal funding. She said its loss has already felt like “a Band-Aid being ripped off.”

Since the beginning of the pandemic, Hillcrest received around $260,000 per year in assistance, which Eubanks described as a way to keep the doors open and offer better pay to her staff.

“It was the first time ever that we were just able to breathe a sigh of relief, you know, not to have to constantly be worried about the bottom line. And now we’re back to not having those funds and figuring out how we’re going to fund early childhood,” she said.

‘Alarming’ numbers

A recent study from the Century Foundation, a think tank headquartered in New York, found that the loss of these federal funds in Alaska could mean nearly 8,000 kids without child care, 209 shuttered centers and over 1,000 child care providers without jobs.

Berglund said she hopes those numbers are wrong.

“They’re very alarming,” she said. Alaska has 406 licensed child care providers.

. “And if those numbers are true, that would mean we’re anticipating half closing. And that would be a crisis beyond the crisis we’re already in.”

Berglund said it was difficult to forecast the exact impact of the loss of the funds in the state. But she said the study’s numbers are in line with survey data collected by her agency in December, which compiled responses from nearly all providers in the state: Half reported that without this federal assistance, they would’ve had to close their doors.

Providers and advocates describe an urgent need for long-term solutions to the state’s child care crisis.

“Child care businesses used those relief funds to just limp along,” said Blue Shibler, executive director of Juneau’s Southeast Alaska Association for the Education of Young Children. “Now that they’re gone, all the challenges child care businesses faced before the pandemic are even worse now.”

There are some efforts at the federal, state and local levels aiming to help address the shortfall.

The Alaska Legislature recently allocated an additional $7.5 million in one-time funding for child care for the coming fiscal year, though that has not yet been disbursed. Gov. Mike Dunleavy in April also stood up a new child care task force to come up with solutions.

The Alaska Department of Health has said it’s working on improving background checks and the licensing process for child care programs, which can be a major barrier to operating, especially in rural Alaska where many communities go without licensed child care.

A federal bill, the Child Care Stabilization Act, was proposed this month in the U.S. Senate, aiming to provide $16 billion in funding for five years to make up for the loss. But lacking Republican support, the bill faces long odds.

In Juneau, city-funded grants to child care programs have allowed businesses to increase worker pay from an average of $12 per hour in 2021 to $20 per hour, which has made a huge difference for programs being able to stay open, Shibler said.

In Anchorage, some funds from the city’s alcohol and marijuana tax revenues are also available to support the child care sector. A ballot measure approved this spring would take the city’s marijuana sales tax money and dedicate it toward creating more access to child care and early education, though those funds also have not yet been disbursed.

Those interviewed for this story said many of these efforts were welcome, but more long-term and immediate solutions were needed.

“Without additional funding that’s sustainable and reliable, we’re going to continue to see programs close across the state,” Shibler said.

A failing business model

Alaska’s child care crisis has been defined by persistently low wages: Across the state, the average pay for a child care worker is $13.50 per hour with no benefits, Berglund said.

Child care businesses often operate at either a loss, or a very small profit, Shibler said. During the pandemic, operating costs increased due to a need for more health and safety equipment, while at the same time, revenue decreased as families kept children at home or struggled to afford care.

“So the relief dollars really just were a Band-Aid on the real problem, which is that child care as a business model doesn’t turn a profit. And it’s really, really hard work,” Shibler said.

Eubanks said that Hillcrest this winter, amid a sharp increase in the cost of living and a lack of response to job postings, raised rates to $16 per hour “just to get applicants in the door.” Even that doesn’t feel like enough for her staff to afford reliable transportation and their rising costs of rent in Alaska, she said.

Trying to fund a business mostly through parent tuition hasn’t been working, Eubanks said.

“We serve 55 to 60 families and have 20 full-time staff. And we’re asking 50 families to pay living wages for 20 staff members,” she said.

Despite now having to spend so much of her income on child care, Matell, the parent of two at Hillcrest, said she feels lucky. Some of her friends haven’t been able to find child care at all, let alone care they can afford.

Matell said that Hillcrest is slightly more expensive than other centers around town based on her research. But when choosing, she took into account the quality of care and said it wasn’t easy to find other, less expensive places with openings. She still hasn’t heard back from the two other facilities where she added her name to a waitlist nearly two years ago.

“It used to be, what’s the best child care for my child? At this point, you’re just looking for child care, period. And trying to pull every string to be able to afford it,” she said.