Minnesota's child-care providers face staff shortages, rising costs

New Horizon Academy, the largest child-care provider in Minnesota, has dozens of classrooms sitting empty and hundreds of families waiting for a spot in one of them.

The missing link: teachers and aides.

New Horizon is looking for 500 of them to work at its 70 child-care centers around the state.

"If we could find teachers, we'd open those classrooms back up," said Chad Dunkley, chief executive of the Plymouth-based company. "I've never seen it this challenging."

With soaring costs and frequent quarantines from COVID-19 cases, the pressures on Minnesota's child-care industry are greater now in many ways than at the start of the pandemic.

Early on, the state quickly delivered grants so providers could keep the lights on for families of first responders while other families kept kids at home in lockdown. Aid continues to flow, chiefly from federal funds, but the grant formula was tweaked last fall to be based on the number of employees at a child-care business.

That has meant monthly grants as low as $420 for family-based providers, who previously received $1,200.

Complying with public health guidelines has added complexity and costs. Until this month, state authorities required providers to impose quarantines on children who had been exposed to someone who contracted COVID-19.

As costs rise and profits evaporate, some providers have been forced to raise tuition prices from levels that usually range from around $150 to $350 a week per child. Others are closing their doors.

Even before the pandemic, Minnesota was experiencing a decline in the number of child-care providers and a shift in their size.

Since 2010, the number of Minnesotans 5 and younger has dropped by about a half-percent, census data shows. But the number of child-care providers is down about 37%, according to data from the Minnesota Department of Human Services. The capacity, or the number of child-care slots, is down about 5% in that time, as more centers that can care for more children have been opening and picking up some of the slack.

Outside of the Twin Cities, where child care was harder to find even before the pandemic, the problems are even more acute.

Many providers don't charge — or at least not the full rate — when a child has to stay home to quarantine.

"If we have a closed classroom, it's a huge, huge financial hardship on the company," Jaquith said. "Our rent and mortgage don't go away. The utilities don't go away. Our fixed costs don't change."

For businesses already struggling, the strain increases when it's the teachers themselves who are out sick. Jaquith shut down the Litchfield center for a few days last month when seven of her teachers were out with COVID-19. That meant the families of 120 children had to scramble to find other arrangements at the last minute.

Minnesota's child-care industry is dominated by home-operated businesses, which account for nearly four out of five of the state's 8,500 providers. They're the ones leaving the industry at a rapid pace. "We lose almost two a day," Saville said.

Beth Jackson closed her home-operated child-care business in July and made the leap into real estate. She had opened a child-care program in St. Paul in 2003 after she had her third child. It was a great way for her to work from home and spend time with her youngest.

"Child care is a really, really tough and interesting industry," she said. "You have to have tenacity. And work 10-hour days. I never took a five-day vacation ever in 18 years, and now I'm in this industry where everyone is like, 'Take one day off a week and a seven-day vacation once a quarter.' And I am like, 'What?'"

Some providers who made it through the pandemic are now raising prices to keep up with rising costs.

At Tierra Encantada, which has several Twin Cities locations, rates for families went up 8% this year, compared to 2% most other years.

"And that doesn't even cover staff [wage] increases," CEO Kristen Denzer said. "A lot of stuff is more expensive now."

She listed some examples in a letter she wrote to families. A case of toilet paper the center buys was $41.20 a year ago. Now it's $51.20. And the bulk mac and cheese it uses has gone up to $21.45, from $14.59 a year ago.

A month earlier, it shifted most of its marketing dollars from recruiting families to recruiting workers. It added recruiters and started running some TV and radio ads.

"It's expensive, but we are getting more applicants because of it," said Dunkley, who added that hiring had picked up enough in December and January that some classrooms could be reopened.

Still, if New Horizon had enough staff, it would have room for at least 700 more children — and has that many on its waiting lists across the state.

Providers would love to raise wages even more if they could, said Maria Snider, director of Rainbow Child Development Center in St. Paul.

"But it's a crazy situation," she said. "Families can't afford to pay more."

"As the director of a smaller center, we don't have ... an HR department," she said. "We don't even have a cook right now, so half of the time I'm the cook. And if somebody is out sick, I'm the sub."