Gov. Tim Walz aims to change struggling Minnesota child care industry

It is the paradox of the child care system: Too few workers are earning too little money while parents are paying too much.

Gov. Tim Walz is making the case that "this is the moment" for a permanent change to help families with child care, as state leaders head into the 2022 legislative session with a projected $7.7 billion state budget surplus.

"Our economic future depends on it. The growth that we want to experience, that all of us want to see, is going to depend on it," Walz said last week at a virtual panel with parents, child care providers and business leaders. He said he does not yet have a dollar figure for how much more the state should devote to child care, but noted that "this is going to take some investments."

The Walz administration's plan for additional child care spending will face resistance from Republican legislators, and it follows a massive influx of federal dollars to support the industry. On Tuesday, Walz announced he put another $20 million in federal pandemic relief dollars toward grants to stabilize child care providers who are struggling with lost revenue and increased costs amid the recent surge in COVID-19 cases.

The COVID-19 pandemic has exacerbated an economic conundrum that Minnesota legislators and governors have been grappling with for years.

Throughout the pandemic, Minnesota has channeled nearly $900 million to child care, more than almost any other state per capita, Minnesota Children's Cabinet Executive Director Erin Bailey said.

But federal pandemic relief dollars are one-time spending, and state leaders hope Congress will act on permanent child care changes.

Walz's recent roundtable on the issue came shortly after President Joe Biden's Build Back Better bill stalled in Washington, with key Democratic U.S. Sen. Joe Manchin saying he would not support it. The $2 trillion domestic policy package included child care assistance for families and free preschool. Biden has said he would work with Manchin, and there is still a possibility the bill will be passed.

"We can't do this alone. We need the federal partnership and resources," Lt. Gov. Peggy Flanagan said. "The Build Back Better plan and initiative is really essential to meet those challenges that families are facing, and states need federal resources to solve these needs as well. But we are committed to leading the way in Minnesota and doing as much as we can."

Business leaders and state officials have stressed the importance of accessible and affordable child care given the nationwide worker shortage. One in four unemployed Americans said the need to be at home to care for children or other family members makes it difficult or impossible to look for full-time job, according to a recent U.S. Chamber of Commerce survey.

Rasheena Bickham has watched the issue play out firsthand. She is a program manger at Catholic Charities' Northside Child Development Center and has two kids who attend the center. For her family, and for those she serves, she said having an affordable place to bring their children is essential to sustaining employment.

"Child care is key. They need child care to go to work," Bickham told state leaders last week, noting that she has seen families lose their child care, then lose their jobs and even their homes. Meanwhile, she said the center has an ever-growing list of parents who have applied for child care but don't qualify for it for a variety of reasons.

"It's definitely hard when we have to turn parents away. We want the children to be in our scenario, in a safe space with peers," Bickham said.

Senate Republicans, meanwhile, are pushing a different approach to tackle staff shortages and low pay for child care workers.

Sen. Mary Kiffmeyer, R-Big Lake, said Walz needs to change the formula for Child Care Stabilization Base Grants, which she said is unfair to people running small businesses out of their family homes, who make up the majority of child care providers in rural Minnesota. The state also needs to scale back regulations in the child care industry, she said.

"It's not about money at this point. It is about hyper-regulation that does not have a significant effect on child safety," Kiffmeyer said.

Meanwhile, House Democrats have been calling for increased spending through various programs for the past few years and will continue to do so, said DFL Rep. Dave Pinto, chair of the House Early Childhood Finance and Policy Committee. He noted that the sector had been "in deep crisis" before the pandemic hit.

Democrats will continue to push for increased reimbursement rates paid to child care providers through the state's Child Care Assistance Program and want to allow more people to qualify for that aid, Pinto said. He said they also want to boost spending on early learning scholarships and support expanding access to preschool.

"I feel like the pressure just keeps on mounting … the Chamber of Commerce, the Minnesota Business Partnership, city councils, employers and others. The pressure keeps going up that there has to be action," Pinto said. "I'm really hoping and expecting that this will be the year that we finally act."