Why is child care breaking?

Child care is a market failure. Parents are stuck on waitlists while providers go out of business. UTK made that much worse.

California recently rolled out Universal Transitional Kindergarten (UTK). Now, four- and five-year-olds who are too young to start Kindergarten can begin school earlier. This care is free, it operates for most of the day, and the students are often eligible for free after school care as well. I will never not stand firmly behind any viable child care option that is free to parents. I hold a well of hope in my heart that UTK will be an amazing option for families.

However, as a child care provider, I also see that it is breaking the child care industry in ways that may not be immediately obvious and that the government has not yet taken steps to address. To understand the fundamental dysfunctionality of this new child care market, you first have to understand how child cares actually make money.

There are two main types of child care programs: child care centers and family child care homes. Most people are more familiar with child care centers. These are commercial facilities, typically with multiple classes sorted by age and typically not also someone’s home. Family child care homes (FCCs) are primarily someone’s home, and that someone provides care for children there. Centers and FCCs are regulated by the same department, the California Department of Social Services (CDSS), but they have different sets of regulations. In general, rules are stricter for centers, making care more expensive. Fortunately, centers are also able to have more students, so they can usually cover their costs.

The most important factor to understand is what providers refer to as ratio. CDSS mandates how many children each staff person can be responsible for, and it changes based on the age of the children. For centers, the ratio requirements are as follows:

0-18 months – 3 children to 1 adult
18-36 months – 4 children to 1 adult
36 months to K – 8 children to 1 adult

In each of these groups, at least one adult must be a highly qualified Teacher instead of a less qualified Aide.

For FCCs, the ratio requirements are different, and are based on a total number of children of which only a few can be under 24 months (called an “infant”). They are as follows:

Small FCC (1 adult) – 4 infants, OR
6 children with no more than 3 infants, OR
8 children with no more than 2 infants and 2 children are enrolled in K or higher
(after school care)

Large FCC (2 adults) – 12 children with no more than 4 infants, OR
14 children with no more than 3 infants and 2 children are enrolled in K or
higher (after school care)

In centers, you need more staff per child the younger the children are. In FCCs, only some of your spots may be filled by younger children. Centers also face another staffing challenge since the recent introduction of new sleep regulations: a separate staff person must be physically present in the nap room while children are sleeping. Because it is both extremely difficult and also disallowed by CDSS’s personal rights regulations to make a room full of infants nap on a schedule all together, this essentially requires an additional staff position just for watching nappers, separate from the regular teachers required for ratio. Centers lose money on infants, but ideally they are able to make up their deficit with the higher margins for non-infant spots. This is also why most centers charge more for infants than for older children.

All of this means that there are a limited number of infant spots available, and preschool spots are essential to make them financially viable. Without enough older children, neither centers nor FCCs are able to cover their costs. Most centers and all FCCs need more older children than infants in order to survive.

The effect of these ratio requirements is that there are lots of spaces for preschoolers and few spaces for infants. Anyone who has ever tried to find daycare for an infant can confirm this. Most child care programs have as many infants as they can take and are struggling to fill their preschool spots. This means that they are not making enough money to keep their doors open.

Into this imbalanced system came UTK.

What UTK does is provide one hundred and fifty thousand free spots (as of 2024) for four- and five-year-olds who would normally be filling those older child spots in centers and FCCs. That’s one hundred and fifty thousand older children who are no longer going to enroll in child care.

So the problem that already existed has become far worse. The same number of infants need care, but far fewer older children do. Programs that were just barely managing to cover their costs with non-infant enrollment are now under water. Most child care programs don’t have large profit margins or emergency savings to tide them through hard times, so they are forced to close their doors, taking their infant spots with them. Surviving programs stretch staff to the breaking point, lowering the quality of care for all children and driving wonderful, highly-skilled teachers out of the field. If this sounds dramatic, it is not hyperbolic.

UTK is a good thing for our society. Free child care is life-changing for many families. I am not advocating against UTK. But we also can’t ignore the fact that it is causing huge problems for an industry that was already strained and dysfunctional, and is making it all but impossible for parents to find care for their infants.

The simple answer is that child care programs need to be able to enroll more infants. We do not like the idea of raising the child:adult ratio for our youngest citizens, but we have no other viable choice. In order to keep the lights on and pay their teachers, child care programs need money. This money comes from enrollment, and with existing regulations it is mathematically impossible for infants to keep a child care afloat. In the era of UTK, our government must choose between raising infant ratios or offering infant care themselves. The status quo, where more and more child cares go out of business even as parents of infants are desperate to find care, is not an option.