Business Weekly Article

State Cuts Put Squeeze On Child Care Centers, Employers

New Mexico Business Weekly. Vol 18, No 5. April 1, 2011

Photo: RANDY SINER, NMBW | Ethel Johnson, who goes by Miss Ethel, director of Southwest Child Care Early Learning Centers, said the company’s new FlexCare program is tapping a big need among workers and helping the company bring in new revenue to cope with state budget cuts in early child care subsidies.


Photo: RANDY SINER, NMBW | Ethel Johnson, who goes by Miss Ethel, director of Southwest Child Care Early Learning Centers, said the company’s new FlexCare program is tapping a big need among workers and helping the company bring in new revenue to cope with state budget cuts in early child care subsidies.

BY MEGAN KAMERICK | NMBW SENIOR REPORTER
mkamerick@bizjournals.com | 505.348.8323

It’s difficult for Ethel Johnson to finish a sentence before her phone rings. 

This time it’s a woman who works as a retail manager. She needs child care on Friday evenings and on Saturdays, when she has regular meetings at work. 

Johnson, or “Miss Ethel,” as she introduces herself, assures the caller Southwest Child Care Early Learning Centers’ new FlexCare program can accommodate her needs, at a cost of about $85 per week. 

Like many child care centers in New Mexico, Southwest Child Care is grappling with cuts in the subsidies paid for child care to low-income parents through the state’s Children, Youth and Families Department. 

The company had to take out a loan to make payroll in January, said Kyle Smith, the company founder. But rather than closing, or trimming staff as some other facilities have done, Smith decided to expand her hours to tap another potential income stream: parents who work nontraditional hours, or numerous jobs, who don’t qualify for state subsidies. 

The response has been astounding, Smith said. 

“We knew there were people who needed this. We didn’t realize the enormous number of people,” she said. “When they find out we will help them, they cry.” 

The clients range from single moms working late shifts at gas stations to nursing students and people working 40 hours a week while attending school full time. The recession also has forced many to take jobs with nontraditional hours, Smith added. 

Other centers, however, have closed or cut staff, said Crystal Sandoval, president of the New Mexico Child Care & Education Association. She owns Noah’s Ark Children’s Center in Albuquerque. 

“We had to increase our rates for private pay parents to make up that [deficit], and we’re looking at our budget all over to see where we can cut and save across the board,” Sandoval said. 

Even before the state cut reimbursement rates to providers by 4 percent last fall, to stay afloat, centers usually had to keep private payers in their client mix, especially if they were five-star programs like hers, she said. 

That’s a federal accreditation, and the highest-rated centers have to maintain a low student-teacher ratio, which means more staff. 

One of Sandoval’s clients does not qualify for assistance, even though she makes $8.50 an hour, so she is quitting her job to stay with her kids, Sandoval said. She most likely will go back on public assistance. 

“That will cost the state even more money, versus when she was working and paying taxes,” Sandoval noted. 

About 24,000 children are on state-subsidized child care, said Linda Siegle, a lobbyist for the New Mexico Child Care & Education Association. The state Legislature trimmed about $10 million from child care subsidies in the budget that was sent to Gov. Susana Martinez, bringing the total amount to $83.1 million, Siegle said. 

Last fall, CYFD modified income guidelines so that only those with incomes at 100 percent of federal poverty guidelines are eligible for the funds. That equates to an annual income of $14,710 for a family of two, said Siegle. 

Those making between 100 and 200 percent of federal poverty income guidelines who were already on the state program are generally grandfathered in, but parents on the waiting list cannot make more than 100 percent. The state first proposed a 10 percent cut in reimbursement rates, which Smith said would have been “the kiss of death.” But 4 percent is still huge for an industry with slim profit margins on top of the change in eligibility guidelines for parents, she said. 

“People ask me if I’m for-profit or nonprofit, and I say I’m taxpaying,” Smith quips. 

Southwest has three centers in Albuquerque. The company has hired three more staff and has offered more hours to its existing workers. 

“We’re taking lemons and making lemonade,” said Johnson, a director with the center. 

Tori Hollins is about to graduate from nursing school at Pima Medical Institute. Her clinical rounds will be on Saturdays, so she plans to use the new FlexCare option for her two children. 

Chevon Wilson is a waitress whose manager recently put her on night shifts. Sometimes that means working a double shift overnight. She recently visited Southwest Child Care to ask about FlexCare. She had been asking friends to watch her daughter at night. 

“But it’s hard, because they have their own kids and life,” she said. 

What many do not realize, Smith said, is the key role child care centers play in the state’s economy. 

“We are the linchpin of economic development,” she said. “Without us, people could not go to work, so if one child care center goes out of business, it’s not just those families who are misplaced, it’s all those taxpaying employees going to TANF [Temporary Assistance to Needy Families] or are unemployed.” 

The state budget cuts also will impact companies whose employees rely on quality child care, she said. 

“We’re not the only business endangered here,” Smith added. 

Marissa Torrez is already anticipating that some of her employees might choose to quit their jobs or try to secure overnight shifts. She is the program manager for the memory facility at Brookdale Place in Albuquerque, an assisted living facility. Starting hourly wages for most of its caregivers are around $9 per hour. If child care centers close or raise rates, she worries many employees will have few alternatives for safe, affordable care.