Rural Minnesota's child care shortage is an economic problem. Luverne offers a solution

Rock County, in Minnesota's southwestern corner bordering Iowa and South Dakota, remains an economic wonder.

A year ago, when Minnesota briefly had the nation's lowest unemployment rate, my colleague Kavita Kumar went there because it had the lowest unemployment of any county in the state. Unemployment is still super-low in Rock County, 1.7%, while the state has been at 2.9% the last couple of months.

But what's impressive now is the way leaders in the county and in Luverne, the county seat, have come together to tackle an obstacle to continued economic success: a shortage of child care.

The city recently purchased a 30,000-square-foot former office building that it will remodel to be the county's largest child care center. It'll be called Kids Rock! (With an !.)

"A healthy community has a great quality of life for families with young children," said Holly Sammons, Luverne's economic development director. "Great recreation opportunities, great culture opportunities, all your basic necessities. And child care is one of those really big components of a healthy community."

Child care is a challenge no matter where you live, no matter if you are looking for it or trying to provide it. Surveys show that a growing number of Minnesota couples, over half in some parts of the state, are making decisions about whether to have more children based on the availability of child care.

"The joke is that everyone asks a care provider if they can get pregnant," Sammons told me last week. She and her husband had three children but decided against having another because their child care provider was ready to retire.

Over the last decade, about half of the nearly 60 in-home providers of child care in Rock County have retired or changed careers. First Children's Finance, the Minneapolis consulting and financial firm for child care providers, says that Rock County has about 370 kids younger than 5 who need child care but has providers for only 240 of them.

In the state's small towns and rural areas, the economics of running a child care operation are particularly tough.

Minnesota's rules for operating a child care center are strict. There needs to be one staff person for every four infants, and one for every seven toddlers. State assistance to child care providers are set according to a market price analysis that, of course, finds that prices in small towns are much lower than in the Twin Cities.

So while a child care provider in Luverne qualifies for less per child than one in Lakeville, the costs they face are essentially the same. Staffers aren't paid that much less in small towns than in the metro area. Food and equipment costs don't differ.

Also over the decade, a half dozen qualified child care professionals have tried to set up a bigger child care center in Luverne. But it never made sense financially.

"Every time we ran the numbers with them, it basically came out like 'You're not going to make any money doing this business plan.' They had to be big enough and charge enough and have very little overhead and have little to no debt service or lease payment in order to make it cash flow," Sammons told me last week.

"These were all qualified, passionate people," she added. "It's a very difficult Rubik's Cube that no one has been able to solve."

As time went on, more and more business owners began to recognize the problem as they saw mothers or grandmothers ducking out of work or leaving jobs altogether. And the pandemic helped in a roundabout way. When everyone was forced to work at home, more realized the importance of child care to people in all lines of work.

"One thing that COVID did was actually highlight the fact that child care is essential, and it truly is the workforce behind the workforce," said Trisha Lien, a program manager at First Children's Finance.

It took time, but in Luverne a consensus grew that local government needed to step into the fray. Officials spent more than a year considering a handful of buildings. They were able to purchase the office building, which had housed a call center, at a great price.

Converting it to a child care center will cost about $6 million. For months, Sammons said, local officials worked with staffers of Sens. Tina Smith and Amy Klobuchar to qualify for about $2.6 million in federal aid. Rock County committed $550,000 and the city put up $2.1 million.

A few weeks ago, the city and the non-profit organization that will run the child care center started a community capital campaign to raise the remaining $1 million. In just two weeks, residents have pledged more than $400,000, Sammons said.

And it's not just Luverne. Around the state, more and more small towns are getting involved in providing child care for residents. Voters in Warren, a town of 1,600 in the northwest corner of the state, last fall approved a half-cent sales tax to fund a $1.6 million child care center.

In Hills, a town of 700 in Rock County's southwestern-most corner, the City Council recently decided to convert a city-owned building and open it rent-free to as many as three child care providers.

"We're hopefully going to make it more affordable by not having much overhead for a provider," Keith Elbers, Hills' mayor, said. Local businesses are donating playground equipment.

Minnesotans have long thought of child care provision as a business. But that's changing. Facing low growth in our population and economy, more Minnesotans are realizing that child care is part of our social infrastructure.

"We provide our public utilities, water, sewers, streets. We do all the things that are essential for a community to function," Sammons said. "Child care is one of those social components that is a necessity."