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Expanding Child Care Access in Rural Communities
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At the Richmond Fed's sixth annual Investing in Rural America Conference, child care providers and experts shared the challenges of providing affordable, quality early care and education in rural communities, as well as solutions they have developed.
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Transcript
Tim Sablik: In May, the Richmond Fed hosted its sixth annual Investing in Rural America Conference in Roanoke, Va. The event brought together researchers from the Fed and community leaders to discuss the challenges facing rural places and elevate solutions that are working. In today's episode, I'll take you into one of the sessions from the conference that focused on the strategies to expand child care access in rural communities.
Having the option for quality child care can enable parents to work outside the home, and a deep body of research shows that early education contributes to a child's success in school and, ultimately, the workforce. But families across the U.S. struggle to find quality child care at an affordable price and the challenges of providing care can be magnified in rural settings.
Sonya Waddell, a vice president in the Research department at the Richmond Fed who moderated this session at the conference, explained why it can be so hard for child care providers to make the math work.
Sonya Waddell: From the perspective of an economist, there's a reason why we might not see the private sector provide child care in a way that meets the needs of today's workforce and of tomorrow's workforce. I benefit from your children being in quality early care and education and, ironically, I probably benefit from it more the less you can afford it. So, it's impossible for a provider to charge a family the full social benefit of that quality early care, and it's impossible for households to pay for that.
The other challenge is that it is highly labor intensive. Unlike, say, a Target or retail where you can think about self-checkout options [and] you can think about productivity improvements that could reduce costs in other places, that is very difficult to do for early care and education.
If you're looking at a highly labor-intensive industry and you're trying to reduce costs, you don't have that many margins outside of salary. So, one of the things that a lot of our panelists have done is to cut costs in other ways and then be able to pay a higher wage to the child care workers.
The challenges of providing child care are often exacerbated in rural areas because, by definition, you don't have the population density. You don't have the number of kids to get the economies of scale, or the right balance of kids between infants and preschoolers to be able to make a child care center or home-based care sustainable. You have lower household incomes often. Transportation is harder — everything is further apart.
Sablik: Haley Grau, executive director of the Middle Tyger Community Center, talked about the lack of available child care in Upstate South Carolina and how it has diminished the labor pool.
Haley Grau: In our community, we operate in a child care desert. There's not enough high-quality child care or affordable child care to match industry and residential demands.
It doesn't make sense for for-profits. We have a lot of Sunshine Houses that come in and do wage studies to see if they can have a thriving business in our community, and they always determine no because our gross median income is under their corporate standards.
We just don't have a lot of options for our families, and so often space is limited. In South Carolina, we had over 100,000 workers that did not come back to the workforce after COVID and child care was the number one reason.
Sablik: Travis Staton, president and CEO of EO Companies in Virginia, noted the wider child care gap in the more rural parts of the state and its consequences.
Travis Staton: I'm coming from two hours down the road — Abingdon, Va. — I'm going to say a large portion of southwest Virginia, more than 7,000 square miles of geography, half a million population. We, too, have very limited access to affordable, accessible child care.
That gap existed before the pandemic. In the 9th Congressional District in southwest Virginia, it was three times the gap compared to the rest of the commonwealth. That's equivalent to 7,000 slots. That's 7,000 children that could have a need. Parents could be gainfully employed, but there is no slot available for those children.
Employers are now seeing, coming out of the pandemic, that [the lack of child care] is impacting them tremendously. It's getting folks back into the workforce.
Sablik: Sandi Scannelli, former president and CEO of the Shallow Ford Foundation, echoed the challenge of recruiting and retaining enough providers to meet demand in Yadkin County, N.C.
Sandi Scannelli: In 2019, our ratios were 19 infants and toddlers to every open slot. If you had a thought to become pregnant, you put that thought on the waiting list. [Laughter]
What we learned early on was that it's the barriers. It's so complex and so many layers. Not only does that discourage new providers from entering the field, it also chases those out. In the last 10 to 12 years, we've lost 82 percent of our family homes and 56 percent of our licensed private providers. It reached crisis proportion.
Sablik: Natalie Renew, executive director of Home Grown, discussed her organization's efforts to expand home-based child care as a potential solution to the lack of providers.
Natalie Renew: When we talk about home-based child care, we're talking about licensed family child care, small businesses operated out of homes. But we're also talking about more informal types of home-based care where grandmoms, aunties, trusted friends step up and step in to support families in meeting their child care needs.
Home-based child care is the most prevalent form of child care in this country. There are about 5.2 million child care providers caring for 12.3 million children under the age of 13 and 6.4 million children under the age of five in a home, either their own home as a provider or the home of the family.
This is the mainstay in rural communities. With low density, it means it's harder for centers to operate effectively, and so often it is home-based child care that fills that gap. The data are pretty clear that while rural children are just as likely to be in child care as children in urban environments, they are more likely to be in home-based child care.
Sablik: But home-based providers face plenty of hurdles as well.
Renew: The conditions in which providers are asked to operate are really challenging. Many of those conditions are created by regulatory frameworks that are not responsive or supporting their compliance and success. That is particularly true for home-based child care, where those regulations are often written with a center serving 100 kids in mind and not that small sole proprietor operating out of their own home.
And so, we see this misalignment between what actually happens and what is needed to keep kids safe and healthy in home-based child care with what is written in the regulations. That creates cost, it creates burden, and it creates overwhelm for the workforce.
Many home-based providers are saying "I can't do that" and won't enter the field at all, or "I won't do that anymore" and are leaving. So, we're seeing a significant decline of this care setting, despite the fact that it is what parents want and it's what is needed in rural communities to meet the child care demand.
Sablik: The panelists then discussed how they were able to overcome some of the challenges to providing affordable child care. For Scannelli, it started with first understanding the problem.
Scannelli: We really knew nothing about child care, but I had a call from the superintendent of schools that says another child care facility is closing and we have a crisis that's going to impact the schools, and is there anything you can do about it?
The first thing that we did was to conduct a study because we wanted to understand it. During the study, we were talking with a national consultant, partially because we wanted to make sure that we were touching all the bases.
In doing that study and in talking to the national consultant, I said, "There has to be something out there. There has to be a solution. Everybody is struggling with this." And he said, "Well, our team has been working on this model that's patterned after a model that is currently on a reservation and has never been off a reservation and operating." We took a look at it and it checked all the boxes.
It's a single facility that, under one roof, has six independent units for six new small child care businesses to start, fully equipped, and could be rented so they don't have to have the start-up cost of operation for the facility. In addition, this facility has a playground, so you have shared costs on some of the requirements for facility licensing.
Not only does it reduce the cost of operation and provide that infrastructure support to new child care providers, which we desperately need, the facility has a training room. The public schools and the community college have said, "We're in," and so we can begin to build a workforce pipeline for child care with earnings that are higher.
Sablik: Despite having identified a viable solution, putting that plan into action wasn't so simple.
Scannelli: We were all excited. We called in the state director of DCDEE [Division of Child Development and Early Education], which is the licensing, regulation, enforcement, training, and she said, "I'd like to say yes, but we can't license this in North Carolina." That was stunning.
For instance, in North Carolina you couldn't have two individual licenses under one roof. The teacher and the administrator had to be two different people. When you have a small child care center, you just can't afford to do all of that. The other thing is there's a corridor with all of these individual businesses, and they were really afraid that all the kids would come out of the businesses and go running down the hallway.
I give them a lot of credit, though, because they said they would work with us. It took us about a little over a year to petition to change the state rules and regulations so that the facility could be licensed. And we did it. The rules were changed and adopted in September of 2023. [Applause]
Sablik: The solution for Staton in Virginia also involved getting buy-in from multiple levels of government to clear a path and attract the investments needed to build a new child care facility.
Staton: Coming out of the pandemic, folks were sitting on the sidelines [and] not gainfully employed because of the lack of access to child care. We had to develop the business case [of] why child care is important. That was one of the biggest challenges — building the alignment among decisionmakers, policymakers, [and the] business community to understand that, once and for all, we should put some resources and investment in physical, tangible structures and things that have longevity to them.
That was extremely successful. We did renovate an 87,000-square-foot Kmart facility into a regional workforce and child development hub. But it was a $26.5 million capital stack, 81 percent of that privately funded. That's a big volume to the business community that stepped up and said, "Yes, you made the business case. Yes, this is going to help our community. Yes, this is going to help me as a private business and an employer. Yes, this is going to help our tax base and our local economy and our governmental agencies." Everyone got to that level of alignment.
We had a 19 percent state investment of $5 million. That was federal ARPA dollars. We were able to seed and catalyze that other investment to get that facility built.
Sablik: Grau also marshalled support from local businesses and community leaders to fund the expansion of their child care center in Spartanburg County, S.C.
Grau: We run a family resource center that's 26 years old. Within that resource center is the highest quality child care in Spartanburg County, with all the A-pluses and five stars. We had 60 children and a three- to four-year wait list. I was tired of telling grandmothers that needed it so they could go to work, "I'm sorry. I just don't have a space for you."
So, I went to our local investors, our businesses, and said, you've been investing for 26 years. You've seen the return on investment every single time. We help your employees. But we want to do more. We need help. Will you help us build a bigger facility?
So, we broke ground on our second campus. ... How we did it is collaboration. This does not work without collaboration. The school district donated the piece of land that we're building the facility on, so we didn't have land cost. Local industry saw the impact because over the past 26 years we have showed up to say thank you and help their employees, so they gave 75 percent of the capital. Then, we got an earmark from the state and a little bit of federal money.
Sablik: In places without child care centers, Renew discussed ways to support home-based providers to fill the gaps.
Renew:There are a lot of different problems we've talked about, and we need lots of different solutions. I think it's really important is increasing investment into the cost of care, building infrastructure to support diverse and diffuse home-based providers, right? Providers are off alone, working in isolated ways, so we need to get resources to them.
In Transylvania, N.C., the county had no licensed child care. They tried to get licensed, home-based child care into the state and were unsuccessful. [They] shifted their focus to support grandparents who were offering child care in the state, and established a resource network for about 60 grandparents that helped these grandparents connect with one another and connect with the organization and state resources so they could access basic needs. They could also do things like plan play dates and get together.
This then became infrastructure that we could deliver Hurricane Helene response dollars through. Because the network existed, that group could get resources.
Sablik: For a deeper dive into the challenges and solutions discussed by the panelists, you can check out a recent article in the Richmond Fed's Econ Focus magazine that we'll link to in the show notes.
The Investing in Rural America Conference is just part of the Richmond Fed's ongoing effort to better understand the challenges facing our small towns and rural communities, and share what we learn. You can find more, such as our Rural Spotlights, on our website. And, stay tuned for another episode from the conference coming soon.
