Alaska child care advocates hope that a new state law and $7.5 million in subsidies will help stabilize a sector in crisis.
Senate Bill 189 broadly passed the Legislature on the final day of the legislative session in May. The measure expands the income threshold for families who can receive child care assistance, and it allows corporations to claim tax credits for investing in child care.
Providers and child care workers have long struggled with low wages, high turnover and meager benefits. Parents have complained of long waitlists and soaring costs at child care centers.
Anchorage Republican Rep. Julie Coulombe, the lead sponsor behind the bill, said in a Thursday interview that she was excited to see SB 189 become law.
“I’m really encouraged that that’s going to start moving the needle,” she said.
Alaska’s child care sector has recently received unprecedented attention. Gov. Mike Dunleavy established a child care task force last year through an administrative order to improve the affordability, availability and quality of child care in Alaska.
SB 189, which reflects the task force’s work, quietly became law this past Monday without the governor’s signature. The governor’s office did not respond to a request for comment why Dunleavy did not sign the bill.
Dunleavy spokesperson Jeff Turner said Coulombe had worked closely with the governor’s office on child care policy. Dunleavy has appreciated Coulombe’s work on the task force, and he was pleased to see the Legislature pass the child care provisions, Turner said.
Tax credits
The authors of SB 189 intended the measure to incentivize private sector investment in child care through tax credits. Public corporations, such as ConocoPhillips and Costco, can now claim up to $3 million in tax credits to build a child care center or to subsidize child care for their employees.
Blue Shibler, executive director of the Southeast Alaska Association for the Education of Young Children, is working to build a new child care center in Juneau with spots for around 100 children. Shibler said she is “really focused” on securing corporate investment.
“It’s a major step forward,” she said about the measure in general. “It shows a commitment by our state to support children.”
Advocates say the COVID-19 pandemic strained Alaska’s child care system to a breaking point and exposed the frailties of the sector. Since then, Republicans nationally have shown a greater interest in investing in child care as a workforce solution.
Kati Capozzi, president and CEO of the Alaska Chamber of Commerce, said member companies have repeatedly complained in recent years about child care affordability and access.
“(It) has created a huge problem among the workforce,” she said.
Consultancy firm Stellar Group wrote a December report that found 19% of Alaska child care centers have closed since 2019. Anchorage saw a 45% decline in child care workers between 2018 and 2022, the report said.
Another 2021 report estimated that Alaska is losing $165 million per year in economic activity from a shortage of child care.
The Alaska Chamber of Commerce advocated for the child care provisions to pass into law. Capozzi said that was a somewhat “surprising development” for a chamber of commerce, but she said improving child care is “a very straightforward business issue, as far as we’re concerned.”
Coulombe and Capozzi said several Alaska companies have reached out with interest in child care tax credits. It’s unclear, though, how many will participate in the program, the Alaska Department of Revenue said.
“Even if one business took advantage of the child care tax credits, it would have an impact in any community,” Capozzi said.
SB 189 also expanded the income threshold for families who can receive subsidies for child care costs, which can exceed annual tuition at the University of Alaska.
The Alaska Department of Health estimates that an additional 18,000 Alaska kids under 12 will meet the new criteria for financial assistance. The state anticipated needing an additional $5.6 million per year for the newly eligible children.
Rep. Zack Fields, D-Anchorage, said the tax credit piece of the bill is the “most interesting,” but he said the expanded assistance for families would be impactful.
“More working-class families will be able to afford child care,” he said. “That’s obviously very positive.”
$7.5 million subsidy
Low wages have long been a major source of frustration in the child care sector. Stellar Group’s December report found the median wage for an Alaska child care worker in 2022 was $15.14 per hour. Alaska providers reported an average annual staff turnover of between 42% and 55%.
Last year, the Legislature appropriated $7.5 million as part of the budget for child care subsidies. Just under 1,600 workers received a wage boost of $4,860 per recipient, the Alaska Department of Health said.
Lawmakers approved the same $7.5 million figure again this year. A legislative fix means this year’s funding can now be paid directly as grants to child care providers.
Leah Van Kirk, health care policy adviser for the Department of Health commissioner’s office, said the grants should start being distributed in January.
“We’ll develop the criteria around that, but we don’t want to be too constricting,” she said.
Heather DeLoach, corporate finance manager at Bright Beginnings Early Learning Center in Anchorage, said that workers’ wages have increased by 50% over the past four years.
“We need those funds, and we’re super, super grateful that the Legislature has seen that need, and so has the governor,” she said.
A child care wage subsidy program has been operating in Juneau for the past several years. Supporters say that has helped stabilize, and even expand, child care in Alaska’s capital city.
Shibler said a couple of Juneau providers had recently reported no staff turnover in more than a year. “That was unheard of,” she said.
Robert Barr, Juneau’s deputy city manager and a member of the governor’s child care task force, said the $7.5 million in state subsidies was “meaningful.” He advocated for the task force to recommend that the state supplement workers’ wages.
Providers operate on razor-thin margins and rely almost entirely on tuition costs. Wages increase, and so does tuition, which further burdens families.
“The business model doesn’t work, right? The math just doesn’t work,” Barr said.
Echoing other advocates, Barr said he hoped the Legislature consistently funds $7.5 million in child care subsidies each year. He said the “one-time nature of it” as part of the budget “makes it hard for people to plan.”
Coulombe, though, was skeptical. A former child care provider herself, Coulombe argued that relying on government wage subsidies “is a dangerous game.” She suggested tax credits, and expanded family assistance were better ways to stabilize the sector.
This week, Dunleavy’s child care task force is set to issue a cost of care study, which will help officials find out how much child care is really costing families, and determine subsidy rates.
Supporters were broadly excited that SB 189 had passed into law. But several said they expect the cost of care study to show that the $7.5 million in subsidies is a good start, but far from enough.
“I think the magnitude of the problem is significant enough that no one level of government is going to be able to fully solve the problem by itself,” Barr said.