Child care providers navigate a challenging and competitive industry, where the substantial cost of providing safe, quality care for children meeting all state standards has to be balanced against families’ ability and willingness to pay for care. Operating a business where narrow profit margins can turn into significant deficits from one week to the next is difficult under normal circumstances, and quickly becomes untenable under more restrictive conditions. As New Jersey tentatively reopens K-12 schools after being closed for over five months, many of the state’s child care providers have remained open throughout the COVID-19 pandemic to serve the children of essential workers. Throughout this time, providers have been required to observe more restrictive group sizes and child/staff ratios, while also increasing time and resources spent on cleaning and sanitizing, to prevent the spread of COVID-19. With unchanged tuition rates, these new standards quickly push many child care providers from an already tight financial situation into one that cannot be sustained.
This paper examines in-depth the impact of new and existing regulations on child care providers’ revenues and expenditures, and the subsidy rates required to financially sustain child care providers in New Jersey. The overall findings can be summarized as follows:
- Changes in required ratio’s and group sizes have a significant impact on costs per child by age group, especially due to providers’ fixed costs.
- Under the state’s most restrictive standards (ten children per room), estimated per child costs increase by up to $36/week per infant enrolled, $147/week per toddler enrolled and $49/week per preschooler enrolled, depending upon the provider’s unique circumstances (see Table 1, below).
- Even under the state’s newly revised COVID-19 standards (15 children per room) estimated per child costs increase by up to $69/week for toddlers and$37/week for preschoolers. Increases to infant slots level off since group sizes are already limited to 12 children per room.
- The impact of licensing ratio changes is further exacerbated by increased costs related to required cleaning supplies, regularly scheduled deep cleanings, and purchasing of personal protective equipment for children and staff. Reports estimate costs of up to $30/week per classroom to cover these expenses.
- Even under pre-COVID licensing standards, state per child subsidy rates for infants can be up to $40/week below what providers need to meet all necessary costs.
- Under the post-COVID ten-child limit, state per child subsidy rates can lag by $79/week for infants, $127/week for toddlers, and $106/week for preschoolers. The new 15-child limit reduces these gaps, but they remain substantial at up to $40/week for infants and toddlers, and $63/week for preschoolers.
- Although the ten-child limit places financial hardships on state-funded preschool classrooms, a return to the 15-child limit places additional burden only on the hours and days that fall outside the state-funded school year.