Larger Childcare Issues

Childcare issues
are much broader than the regulation
of providers.

The first five chapters of this report deal with issues that pertain strictly to the licensing process and improvements that can be made to that process.  Recommendations in these chapters should strengthen the licensing process and can largely be addressed by DFS and the Legislature. 

However, childcare issues go beyond the licensing of out-of-home providers.  During the course of this evaluation, we learned that many of the issues at the heart of the debate over childcare are much broader than the regulation of childcare providers and are not ones that the licensing function can address.  Rather, they relate to the affordability, availability, and quality of childcare.  Even if the licensing unit were working optimally, it alone could not address these matters.  This chapter gives a summary and overview of larger childcare policy issues and recommends a state-level forum to tackle wide-ranging childcare matters as interrelated concerns. 

Licensing Unit is Not Appropriate Entity
to Address Larger Childcare Issues

Statute charges
DFS with licensing childcare providers.

DFS is not responsible for ensuring care is affordable and available.

Addressing larger childcare issues conflicts with licensing’s regulatory role.

Other entities must assume a primary role in developing affordable and available care.

Although childcare experts note an effective program regulating childcare facilities is essential to provide quality early childcare, it is not the only element necessary.  Nevertheless, we found inherent assumptions that the licensing unit should be responsible not only for regulating childcare, but also for ensuring that care is affordable and available. 

Wyoming statute does not charge the licensing unit with ensuring that care is affordable and available, or even of an optimal quality level.  Childcare is a regulated industry, and DFS is tasked in statute only with conducting a process that provides official permission to operate an otherwise restricted business.  The licensing process described in this report provides assurances of a minimum threshold of protection for children; it does not guarantee an ideal educational or developmental environment for children in care.  According to NARA, licensing rules are just one piece of a quality childcare system. 

At present, the state lacks a function dedicated to considering larger childcare issues, one that could establish policy on how to improve childcare quality, affordability, and availability.  We believe such a purpose cannot be accomplished effectively by the same governmental entity that licenses and regulates childcare providers.  Tasking the licensing function with responsibilities for greater childcare issues conflicts with its regulatory role and could well detract from the primary mission of the licensing unit. 

NARA notes that although licensing agencies cannot completely separate themselves from an interest in capacity building, this must not be their primary objective or even a major piece of their responsibilities as an agency.  Other entities must assume a primary role in developing options for more affordable and available care, so that the licensing agency can perform its core function of consumer protection.  NAEYC also notes that government needs to play a key role in addressing childcare issues, but only one of those roles, regulation, should be carried out by the governmental licensing function. 

A Broader Forum is Needed
to Address Childcare Issues

Responsibility for meeting childcare needs should be shared among many stakeholders.

Several states have
created state-level forums to resolve childcare issues.

These entities
are charged
with statewide strategic planning
for childcare.

Childcare experts note that these issues can be successfully addressed only through the coordinated and active participation of many different agencies and institutions.  Responsibility for meeting childcare needs should be widely shared among individuals, families, voluntary organizations, employers, providers, and government at all levels.  As one national childcare expert stated, “Childcare is a labor problem, a social problem, a regulatory problem, an intergovernmental problem, and of course, a familial problem.”  

To achieve childcare goals, experts recommend states create an infrastructure charged with conducting comprehensive statewide planning to allocate resources in a systematic manner.  Such planning should bring together the many stakeholders in the early childhood arena.  Other states have created forums to address childcare issues, separate from the licensing function.  According to a study by the National Academy of Public Administration, several states have created children’s cabinets or councils to develop a strategic planfor achieving childcare goals.  For example:

·         Alaska’s governor created a children’s cabinet to support collaborative program planning across state agencies and departments that deal with young children.  The cabinet is charged with overseeing an interdepartmental workplan for ensuring a comprehensive, high-quality system of services for young children.  Alaska also developed a media campaign to help parents make informed childcare choices. 

·         Georgia has created state-level partnerships among families, communities, advocates, business leaders, non-profit organizations and state agencies to create a comprehensive system of childcare services.

·         North Carolina has created a state-level non-profit corporation to support and guide county partnerships that provide comprehensive, integrated services to children, including childcare services.

Other states have created offices within government agencies to address larger childcare issues.  In 1990, the Utah Legislature established an Office of Child Care within its Department of Workforce Services.  It carries out long-term planning and coordination of statewide childcare issues, and is separate from the licensing program in Utah, which is housed in the Department of Health.  The Utah legislature established this office to provide policy and planning to increase the quality and availability of care in the state. 

All Stakeholders Should Be
Included in Childcare Forum

Employers can help alleviate childcare supply problems.

Childcare issues

also impact a wide range of government programs.

Although several entities in the state are devoted to addressing early childhood issues, we found that these groups have not been brought together to most effectively address childcare issues in Wyoming.  Also, because early childhood issues have impacts across many different areas of society, we believe additional stakeholders need to be included in designing comprehensive childcare policy for the state. 

For example, childcare is a major issue for employers because, when there are failures in childcare arrangements, worker productivity can suffer.  Employers have found that offering childcare assistance to employees helps attract and retain workers.  Employers can also play a role in alleviating childcare supply problems by allowing employees to work flexible schedules, thereby potentially reducing the need for childcare. 

Different government functions also need to play a key role in establishing childcare policy because of the impact of childcare on their programs.  Schools have a stake in early childcare issues, since high-quality childcare programs improve the likelihood that children will enter school ready to learn.  Childcare experts also note that schools can help alleviate parental need for after-school childcare by providing after-school programs.  Human service agencies need to be included in a childcare forum; experts note that one of the key indicators of whether welfare-to-work participants will remain employed is whether they have found adequate childcare.  Studies also have shown that quality childcare programs can reduce the incidence of juvenile delinquency as children grow up.

Forum is Needed to Balance Issues of
Affordability, Availability, and Quality

Affordability, availability, and quality are at
 the heart of the childcare debate.

A major concern for working parents is to find good childcare that is affordable.  These needs are often referred to in childcare literature as the “trilemma” of quality, affordability, and availability.  This trilemma represents the heart of the childcare debate that the state needs to address.  Public policies to improve childcare need to balance concerns for the quality, availability, and affordability of childcare. 

Experts note that childcare quality entails tradeoffs.  Although higher quality childcare is desirable because it enhances developmental outcomes for children, it also usually costs more than lower quality care.  According to NARA, generally, the lower the quality the more affordable and plentiful the service.  On the other hand, the higher the quality, the better children will be served, which can reduce governmental expenditures in the long run. 

Some experts have raised concerns that although regulations are intended to improve the quality of licensed care, they can have the opposite effect if they force children into unregulated care of lower quality and cost.  Other experts believe policies that keep regulations at a minimum and exempt categories of providers from regulation in order to help expand supply, encourage the use of lower quality informal and unregulated care and thus are harmful to children. 

Quality, Affordability, and Availability
are Not Mutually Exclusive Options

Childcare policy should strive
to balance all
three needs.

Many states have increased quality, while maintaining affordability and availability. 

Choices between quality, availability, and affordability do not need to be mutually exclusive options:  childcare policy should strive to balance all three needs.  One national childcare expert believes that tradeoffs between affordability, availability and quality can often be avoided or mediated.  These three needs should be pursued as fundamental goals of childcare policy, rather than pursuing one at the expense of others.

Many childcare experts recommend that policy makers use financial incentives to help providers meet licensing requirements.  They contend additional resources are necessary to meet the cost of quality care at an affordable price.  Numerous states have increased the quality of care while maintaining availability and affordability; they offer financial incentives to providers to help meet more stringent childcare regulations.  According to the U.S. Department of Health and Human Services, 21 states have established grant and loan programs to assist childcare providers in meeting or maintaining the standards required by state and local licensing regulations.  For example:

·         Kansas offers grants up to $1,500 per provider to help maintain or meet licensing requirements.

·         Louisiana makes grants to providers for minor remodeling and repair to assist them in coming into compliance with state and local licensing and safety standards.

·         Nevada maintains a revolving loan account that can be used by first-time family childcare providers who have completed training, but cannot afford the costs of minor modifications to meet minimal facility standards.

·         New Mexico funds training for a 45-hour entry-level childcare course for providers entering the field. 

Wyoming has also used federal funds to offset the costs of providing childcare.  For example, DFS recently awarded $1.7 million in grants to providers for start-up and operating costs, equipment, and salary support in 22 programs.  Wyoming has also offered grants to providers to purchase fire extinguishers and smoke alarms and to have telephones installed.  Additional efforts such as grant programs may help providers meet childcare regulations, while maintaining affordable and available care.

States Use Federal Childcare Subsidy Programs
to Balance Affordability, Availability, and Quality

Wyoming may
be able to more effectively leverage its subsidy funds to balance these needs.

We found that many states are using their federal childcare subsidy  programs to balance affordability, availability, and quality.  While Wyoming participates in this program, the state may have opportunities to more effectively leverage federal funds from the program to address the trilemma. 

To increase the availability of care, some states require all providers who receive reimbursement funds to be licensed, an incentive that may help expand licensed supply.  To ensure affordable care, several states, including Wyoming, have expanded eligibility in the reimbursement program so that more families have access to affordable care.  Additionally, to increase the quality of care available, some states have established differential reimbursement systems that reward providers who meet higher quality standards.

Quality, Availability, and
Affordability in Wyoming

The full impact
of proposed childcare rules
is not known.

During this study, we evaluated how regulatable features of quality in Wyoming compare to other states’ regulations and national standards.  We also analyzed the availability and cost of care in Wyoming.  We do not offer definitive conclusions about the impact of current and proposed regulations on the affordability and availability of care, and the academic literature available about the impact of regulation on these issues is not conclusive.  However, as noted, we did find that many states are trying to increase childcare quality by raising licensing standards, while also maintaining the affordability and availability of care through increased public funding.   

Regulations do Not
Ensure Quality Childcare

Although rules
do not ensure quality, they create an environment in which it is more likely to occur.

High-quality care reduces the need for later governmental interventions.

We have found that “quality” childcare can have many different meanings to people.  Childcare experts define quality as having two interrelated components:  process quality, which relates to the experiences of children in childcare, and structural quality, which relates to aspects of the childcare environment that can be regulated. 

In this evaluation, we examined only the “regulatable” aspects of quality.  However, regulations alone do not necessarily ensure “quality” care.  We found that the current minimum standards for childcare enforced by DFS are meant to ensure the health and safety of children, not the quality of care provided.  For example, Wyoming regulates only certain aspects of care, ensuring that providers are meeting minimum standards in those specific areas.  Areas such as the education and stimulation of young children are outside the realm of regulatable aspects of childcare in Wyoming.

While regulation does not guarantee quality of care, it does create an environment in which quality care is more likely to occur.  NCSL research indicates that regulated facilities are more likely to have higher quality programs.  Experts agree that the most important aspects of care, known as the “iron triangle” are group size, ratios, and staff qualifications.  Of these, Wyoming currently regulates the last two and will regulate all three under the new rules.  NCSL adds that licensing standards that address ratios, group size, and training and education of staff have been correlated with higher quality care. 

Many contend that high-quality childcare is in the interest of the state.  Several studies have shown that high-quality care improves the developmental and educational outcomes of children, reducing the need for later governmental interventions.  Early intervention programs are said to generate savings to government through increased tax revenues, decreased welfare outlays, and reduced spending on health, education and social services, and criminal justice. 

Wyoming’s Regulations are Less
Stringent Than Many Other States

Wyoming’s ratios, groups sizes,
and provider qualifications are less stringent.

Few states, including Wyoming, meet national standards, and  Wyoming is actually less stringent than many states in regulating childcare.  We found that Wyoming lies somewhere in the middle of the 50 states in the stringency of most aspects of its childcare regulations.  With the new rules, Wyoming’s place among the 50 states will rise somewhat, but still fall short of national standards.  The following comparison of specific regulations to other states helps place Wyoming’s regulations in perspective:

·         Under current rules for infants, Wyoming’s ratio of one staff member to five children is higher than most states.  The proposed rules appear to bring Wyoming into alignment with the majority of states, at 1:4.  However, the proposed rules allow a single provider to take care of more infants and toddlers than do the current rules. 

·         Currently, Wyoming is one of 16 states that does not regulate group size.  The proposed rules begin to regulate group size, but the standards for group size would be considered poor by a leading study comparing states’ childcare regulations.

·         Most states, including Wyoming, do not require pre-service training.  However, under the new rules, Wyoming will require pre-service training for all license applicants. 

·         Most states require more ongoing training for center teachers than Wyoming does, although the proposed rules will bring Wyoming into the mainstream with 31 other states.

·         Wyoming is one of eight states whose rules require providers caring for more than two children to be licensed.  This the only area where Wyoming meets NAEYC standards.  The proposed rules will not change this regulation.

Supply of Care in Wyoming
Has Been Decreasing

Although supply
has declined, so
has the number of children in the state.

Between 1990 and 1999, both the number of childcare providers and the number of licensed childcare slots in the state declined.  Policy makers and members of the public have expressed concern about this  decline.  However, the number of children also decreased during this period.  Although the decline in licensed slots (18 percent) was somewhat greater than the decline in population (15 percent), we found that the proportion of the childcare age population actually accommodated in licensed childcare slots increased 25 percent for the state overall, and increased in most counties.

Nevertheless, Wyoming still faces shortages of care in several different areas.  While various shortages are found in different parts of the state, depending on demand, we found some shortages to be universal.  Wyoming appears to be lacking infant slots, slots during non-traditional hours, and after-school care. 

Regulation Does Not Appear to be the
Primary Reason Providers Leave the Market

Most providers who left the childcare profession did so
for financial reasons.

The childcare profession is one
of the lowest paid occupations in Wyoming.

We examined why the decline in the number of providers over the last decade has occurred.  We found that providers leave the market for a variety of reasons, but the level of regulation does not appear to be a significant factor.  Children’s Nutrition Services (CNS) conducted exit interviews with 71 providers who recently left the childcare profession.  They found that 45 percent of the respondents reported leaving for financial reasons, another 28 percent left for personal reasons and 15 percent moved out of state.  Only 7 percent reported they left the profession because of licensing requirements.

The childcare profession is one of the lowest paid occupations in Wyoming, a fact that is compounded by lack of benefits and long hours of work.  In the past, many providers depended on the federal nutrition reimbursement to supplement their income.  However, a recent federal change in payments reduced the subsidy and thus decreased the providers’ income.  These changes have been cited as a reason some providers left the market. 

The Wyoming Department of Employment (DOE), Research and Planning Division tracks occupational wage rates in the state.  Their 1999 wage study reveals that childcare workers earned a mean wage of $6.35 per hour.  This was the ninth lowest hourly wage rate in the state for occupations tracked by DOE.  Maids, bartenders, and service station attendants all earned higher hourly wages than childcare workers in 1999. 

Entry-level wages for childcare workers start at $5.80 per hour according to the wage study.  This rate is not appreciably different than the earnings reported in a wage study of childcare providers in 1991.  At that time, home providers earned an average of $5.13 per hour and center providers earned an average of $5.78 per hour.

Regulation Can Affect Supply

Regulations limit the number of children in a provider’s care.

However,
new provider classifications have the potential to increase capacity.

While providers may not leave the market because of regulation, regulation can affect the supply of licensed slots.  Regulations impact supply by limiting the number of children a provider can care for because of square footage, staff to child ratios, or the ages of the children in care.  As discussed in Chapter 5, local zoning regulations can also have a major impact on the ability of a provider to care for children, thus limiting supply. 

Nevertheless, the proposed rules actuallyhave the potential to increase overall capacity in childcare facilities in the state, specifically in the infant/toddler category.  Home providers currently may care for only two children up to the age of two.  Under the new rules, home providers will have the opportunity to care for up to four children under the age of two. 

Providers currently classified as FDCH will be allowed to expand their capacity from 6 up to 10, depending on the ages of children in their care, under the new FCCH classification.  Those currently classified as GDCH providers have the choice, if at capacity, to drop one child and become reclassified as a FCCH, or increase capacity from 11 up to 15 children and become reclassified under the new FCCC designation.   

These options have the potential to expand the overall childcare capacity in the state, depending on other factors that can limit capacity for individual providers.  As noted above, whether providers will increase their capacity under the new categories depends on whether they have enough space in their facility, the ages of the children in their care, the number of staff they employ, and local restrictions.  Further, many providers may only want to care for a limited number of children and may not want to increase capacity. 

Finally, it appears that a number of providers already meet the proposed ratio and group size changes, so many of them will not need to reduce the number of children they care for when the new regulations go into effect.  In our survey of providers, 36 percent reported they already meet the proposed ratio changes and 30 percent report that they already meet the maximum group size requirement.

Childcare Costs Represent
a Major Expense for Families

Childcare represents the fourth largest household expense for families.

Childcare costs represent a significant expense for parents.  A 1995 study of childcare costs by the University of Colorado found that even mediocre childcare is costly to provide.  This is because childcare is a labor-intensive service and the largest proportion of a childcare program’s budget is devoted to staff salaries.

According to the U.S. Census Bureau, childcare represents the fourth largest household expense for families, behind food, housing, and taxes.  The Wyoming Children’s Action Alliance conducted a survey of childcare fees in the spring of 2001, and reported that childcare costs range from $3,600 to $4,700 annually for Wyoming families, depending on the child’s age and type of facility chosen.

Childcare expenses represent a large portion of family income in Wyoming.  Using household income data from the Department of Administration and Information’s Economic Analysis Division, we calculated the percent of income these childcare costs represent for Wyoming families.  We found that full-time costs for one child in care range from 17 to 22 percent of the income of two full-time minimum wage ($5.15 per hour) workers in Wyoming.  The percentage depends on the age of the child and whether care is obtained from a home provider or a center.  Full-time care for one child represents 10 to 13 percent of the median household income in Wyoming, which was $36,712 in 1999.  

Parental Fees do not Reflect
the True Costs of Care

Nevertheless, parents do not
pay the total costs
of childcare.

Providers are reluctant to raise their rates, even when operating costs increase.

Although childcare expenses represent a substantial portion of family income, parents alone do not pay the costs of childcare.  Childcare is a subsidized industry.  Many providers receive a portion of their income from government subsidies or other donations.  A University of Colorado study found that cash payments from government and philanthropies represent one-third of income for childcare centers. 

Additionally, studies of childcare costs reveal that most providers have a low rate of return on their investment and they subsidize the true costs of care through forgone wages and benefits.  The Colorado study found that about a quarter of the full cost of childcare is covered by foregone wages and benefits of childcare workers.

We found evidence that providers are foregoing income to maintain affordable care.  We compared the monthly costs of care over the past decade and found that costs have not increased substantially over the past ten years.  Many observers of the childcare system in Wyoming and childcare providers themselves reported that they are reluctant to raise their rates for any reason, even when operating costs increase. 

Providers report that they do not increase rates because they are concerned about affordability for their clients.  Nonetheless, childcare advocates note that providers need to view their services as a profession, and that like any small business, should recognize that they must increase their rates as their overhead costs rise.  This is especially important to increase the quality of care.

Forum is Needed to Address Market
Failures in the Childcare Industry

There are indications the childcare market has failed to allocate resources efficiently.

Studies of the childcare industry indicate that this sector shows signs of market failure.  Serious market imperfections often justify public action and provide impetus for government action.  Economists define market failure as a situation in which a market left on its own fails to allocate resources efficiently. When this occurs, a variety of public-sector interventions may be needed to address these failures. 

The childcare literature we reviewed pointed to two primary reasons market failure may be occurring in the childcare industry.  First, we found evidence that parents may not be able to act as informed consumers in the childcare marketplace.  Second, quality childcare accrues benefits to society as a whole, not just to the individual consumer.  These issues are explained in the two sections below.

To address market failure in the childcare industry, government can engage in activities to provide information to consumers, regulate providers through licensing, offer financial incentives to providers, subsidize the cost of care for consumers, and provide incentives for employer participation in addressing childcare issues. 

Parents May not be Able to Act as Informed
Consumers in the Childcare Marketplace

Wyoming parents may not have the tools they need to make informed childcare decisions.

Many parents overestimate
the quality of care they purchase.

The introduction to Wyoming’s childcare licensing rules states that, “Ultimately, parents are responsible for finding quality day care for their children.  These rules will assist in that search, but the final determination of choosing a day care rests with the parents.”  Although parents should make decisions about the most appropriate care for their children, Wyoming parents may not currently have the tools they need to make informed decisions about care for their children.

Economists note that one of the key characteristics of an effective market is that informed consumers will demand quality in the goods and services they purchase.  However, the U.S. Department of Health and Human Services notes that it is difficult for parents to acquire information about the comparative quality, cost, and availability of care, and they are unsure how to evaluate the information they do acquire.  Parents generally have limited knowledge of the childcare options available to them and thus make decisions for care based primarily on convenience and cost. 

Furthermore, several childcare studies have found that parents may overestimate the quality of care they purchase.  A 1995 study by the University of Colorado about the cost and quality of care found that although parents report that they value good-quality care, they substantially overestimate the quality of their own children’s care.

Parents may overestimate the quality of care their children receive because, in childcare, the purchaser is not the consumer.  According to the Colorado study, parents need to make judgments based on imperfect information about the product they are purchasing.  This is because parents are not present to see what happens throughout their child’s day to accurately assess the quality of services the child receives.

According to economists, for a market to function well, buyers must know exactly what they are purchasing.  A key way to address the need for enhanced consumer knowledge is to engage in a media campaign educating parents about the factors that affect quality.  Consumer education efforts will enhance parents’ ability to make informed decisions in the childcare marketplace. 

Quality Childcare Benefits Society
as Well as the Consumer

Services that benefit individuals other than the consumer are considered collective goods.

Society often subsidizes collective goods to create an optimal amount of the service.

A second cause of market failure in the childcare industry is what economists call “externalities,” which are effects beyond the primary consumer.  Quality childcare benefits society as a whole, and not just the consumer.   

As already noted, quality childcare is believed to reduce costs of future governmental interventions in the public school system, the welfare system, and the correctional system.  Quality childcare also accrues benefits to employers through increased worker productivity.  Studies show that workers with reliable childcare arrangements are more securely attached to the labor market. 

When goods and services benefit individuals other than the direct consumer, they are known as “collective goods.”  Society often subsidizes collective goods in order to create an optimal amount of the service to benefit society.  To the extent that policymakers view childcare as a collective good, it becomes the concern of public in addition to a concern of the consumer, elevating childcare issues to a matter of public debate and public action.   

Recommendation:  The Legislature should consider authorizing a task force to begin addressing larger childcare issues. 

The goal is to develop a statewide consensus on
larger childcare issues in the state.

The task force should develop policy options to ensure available, affordable, quality childcare in the state.

Task force representation should include a broad cross-section of Wyoming citizens.

We recommend the Legislature authorize and fund a task force that brings together major stakeholders to develop a state-level policy for balancing childcare issues in Wyoming.  The purpose of this task force is not to duplicate the efforts of the many other childcare entities that currently exist in the state.  Rather, the goal is to effectively coordinate the independent efforts of these entities and other stakeholders to develop a statewide consensus on larger childcare issues in the state.  The task force should report to the Legislature within a year on the results of its work and make recommendations to the Legislature for childcare policy in Wyoming. 

The task force should not oversee childcare regulation in the state, but should focus on coordinating larger childcare issues.  The task force should be charged with developing policy options to balance the availability, affordability, and quality of care.  It should  also determine what funding options may be available to balance these needs.  Specifically, the task force should consider how to most effectively leverage available funds to increase the availability of affordable care while protecting the health and safety of children in care.  The task force should consider options that will help providers meet the state’s licensing requirements, and help parents pay for care that meets the state’s licensing standards. 

The task force should also consider whether Wyoming should create a permanent entity to coordinate larger childcare policy issues.  Based on the task force’s recommendations, the Legislature may wish to create a

dedicated entity in state government to coordinate childcare issues in the state or charge an existing entity with coordinating these issues. 

The task force should include representation from a broad cross-section of Wyoming citizens.  Some of the stakeholders that should be represented in this forum include parents, providers, employers, advocacy groups, local government officials, and state government officials, including legislators. 

State government representation should include officials from existing councils and boards that deal with childcare issues, the Department of Education, the Department of Agriculture, the Department of Health, the Fire Marshal’s Office, the Department of Workforce Services, the Wyoming Business Council, and officials in DFS who represent welfare programs, juveniles services, and the licensing and reimbursement program.