Alaska child care study shows sizable state subsidy gap

A first-of-its-kind study into child care in Alaska shows a sizable gap between state subsidies and the true cost of child care.

When determining child care subsidies, state officials have used a market-based survey, which simply summarizes what providers charge for child care. A true cost study is much more expansive, and includes all of the expenses actually required to provide child care.

The 112-page true cost study, written by the McKinley Research Group, was unveiled on Friday at a child care task force meeting. Gov. Mike Dunleavy established the task force last year through an administrative order to improve the affordability, availability and quality of child care in Alaska.

The study shows the average monthly cost of providing child care at licensed centers across Alaska ranges from $1,785 for infants to $1,250 for preschoolers. The average monthly cost of providing child care at home-based centers averages at $911 per child.

But those costs vary widely by region in Alaska, with higher figures reported in rural parts of the state that have higher utility and transportation costs. Some regions in Alaska have few, if any, licensed child care options, the report’s authors said.

Senate Bill 189, a landmark child care measure, passed into law last week. The new law expands the income threshold for families who can receive child care assistance. The Alaska Department of Health estimated that an additional 18,000 Alaska kids under 12 will meet the new criteria for assistance at a cost to the state of $5.6 million per year.

[Alaska child care advocates hope new law and $7.5 million in subsidies will help beleaguered sector]

Friday’s report describes a substantial cost for families above what they receive in state child care assistance. The average gap at child centers ranges from $766 per month for toddlers to $360 per month for preschoolers. The gap at home-based centers, though, is much lower.

In an interview Friday, Leah Van Kirk, health care policy adviser for the Department of Health commissioner’s office, said state health officials refer to child care costs in excess of state assistance as “the over-and-above.”

She said around 20% to 30% of child care spots in Alaska are filled by families who receive state child care assistance. Low-income families are underutilizing that assistance “because they can’t afford the over-and-above,” Van Kirk said.

Low wages, lack of availability and high tuition costs have left Alaska’s child care sector in crisis. Half of families report they cannot fully participate in the labor force due to the cost, availability, or quality of child care in Alaska, the McKinley Group’s report stated.

Child care advocates applauded SB 189 passing into law and said it was a good first step to stabilize the sector.

Stephanie Berglund, CEO of thread Alaska — a child care advocacy network — said the gap shown between state subsidies and the true cost of child care was unsurprising. She said Friday’s report would help inform strategies to strengthen the sector and improve affordability for families.

“The exciting part about this study is it’s going to give more accurate numbers to what that gap is and how we can better support child care businesses and the sector overall,” she said.

Earlier in the year, thread Alaska called on the Legislature to appropriate $30.5 million for the beleaguered child care sector. The Legislature approved $7.5 million for providers.

Berglund said Friday that advocates are “really excited” about the $7.5 million appropriation, but she anticipated a larger funding request next year than $30.5 million. Robert Barr, Juneau’s deputy city manager and a member of the governor’s child care task force, echoed Berglund.

“I think the subsidy rates will have to increase for the families who need it,” he said.

Task force members, though, expressed caution. They said providers often set their tuition costs based on child care subsidy rates. Boost state subsidies, and tuition costs could inadvertently increase too much for families who don’t receive state assistance.

Berglund said that finding, too, was unsurprising. There could be strategies to decouple subsidies from tuition costs or potentially a flat subsidy paid to providers, task force members said.

The governor’s child care task force issued its first set of recommendations in December to stabilize the sector. Those recommendations included state wage subsidies for child care workers.

The task force is now finalizing a second set of recommendations. Those include allowing state subsidies at unlicensed child care providers run by friends and neighbors; finding underused space in schools that could be used for child care, and subsidizing child care for the children of child care workers.

Anchorage Republican Rep. Julie Coulombe, the lead sponsor behind SB 189 and a member of the task force, said she was really “pleased that the task force is wrapping up with some good, detailed recommendations that, if implemented, can help working families access quality childcare.”

The second set of child care recommendations are set to be put out for public comment later in August, before they are then submitted to Dunleavy in September.