Appendix II: New Jersey Child Care Industry Fact Sheet

New Jersey Child Care Industry Fact Sheet Prepared by Early Childhood Education Advocates

December 2020

A portrait of community based licensed private child care in NJ pre-pandemic

• 4100 predominantly female owned centers throughout NJ
• Open 240 days
• Typical hours are from 6:30am to 7pm
• Caring for children 8 weeks to 6 years old
• Government regulated, oversight and enforcement of; staffing, ratios, protocols, curriculum, developmental emotional & social practices, health, hygiene and record keeping by NJ division of Children and Families (DCF)
• Mandatory EPA regulations for all buildings and grounds, as per NJ Madden Law
• Vast majority of the industry’s patrons are working, involved in work related training or pursuing formal degrees

This highly regulated industry has foundational social significance for New Jersey.

NJ Economic Facts

• New Jersey population 9,005,644
• 0-4-year-olds population 521,718
• 9% of population have children 0-4 years old
• Children in paid care 191,568 or 36.7%
• Labor Force participation 63.6%
• Female labor force participation 59.8%
• Median household income $80,088
• Children under 5 years old in poverty 15.5%
• Total child care industry revenue $1,923,700,000
• Total Federal/State care assistance $554,108,208

Child Care Economic implications to the state of New Jersey

• $250mm in corporate taxes
• $100mm+ in real estate taxes
• Working parents who use licensed child care services contribute over $8billion in taxable income
• The child care industry is a labor intensive business with low margins and high fixed costs
• 87,000 employees (mostly women)
• 45 – 50% of child care center gross income goes to payroll
• 40% of the industry’s revenue goes back into our economy
• Net contributions to NJ economy is in excess of $4.1 billion annually

This industry has historically been overlooked for its significant contribution to the State’s economy.

The current state of child care in a COVID environment

• COVID restrictions have reduced center’s capacity by over 25%
• Mandatory staffing requirements have increased staffing costs by over 50%
• Additional cleaning and supplies (PPE) required has increased business expenses by approximately 5%
• Most centers have had to reduce their operating hours to allow time for extra cleaning-which in turn has also reduced revenues
• Most studies estimate that over 50% of child care centers in NJ will not be able survive financially without intervention

The current socio-economic state of child care

• During the pandemic 39% of our working parents have either quit or reduced their jobs because of lack of child care.
• Child care issues has disproportionately affected women, particularly Latina and Black women
• Some parents are fearful to send their children to school and/or child care center.
• Many parents are trying to balance working from home with caring and educating their children.
• Many parents have lost their jobs and do not send their children to child care or preschool
• Outside of the essential workers, hourly middle and low income wage earners make up the majority of families in attendance during the pandemic.
• Child care deserts during the pandemic will be most destructive to rural and middle income areas whose residents don’t qualify for state subsidies and cannot work from home

The sustainability of childcare short term and long term

• Unlike other industries, successful child care requires a reliable long term affiliation between the business and its customers. Centers must establish a relationship with families to assure that their children’s developmental needs are being met. This is not a sporadic or intermittent service.  Consistency of service is vital to the child’s development and the viability of the center.
• Once a center closes, reopening is problematic; parents might have found alternate care, staff might have found other jobs, buildings might have been repurposed, licenses need to be renewed etc.
• It takes on average six months to one year to open a new center due to licensing requirements and EPA regulations

Many factors make it crucial that our state assure the sustainability of the entire child care industry- short term for pandemic recovery and long term for social and economic stability.

Short term:

• A recent study by the Center for American Progress estimates that 54% of New Jersey child cares could close due to the pandemic.
• The effect of this capacity loss would equate to over $2billion to our state’s tax revenue annually
• The loss of jobs, productivity, and taxable income would be exponential - likely resulting in excess of $10 billion decline to our state’s economy
  
  

It critical for our state, socially and economically, that we intervene financially to assure this does not happen.

Long term:

• The child care industry is currently facing a one-two punch. The COVID -19 pandemic is only the first punch.  The second punch will come in the form the State’s goal for universal preschool (UPK) for 3 & 4 year in the public schools 
• UPK will shift 3 and 4 year old’s to the public sector and will ultimately constitute an additional 40% loss of children to the child care industry.
• Due to regulated staffing ratios a typical child care center loses money serving infants, breaks even serving toddlers and makes the lion’s share of their profit serving 3 and 4 year old children. As such, the 40% loss of children to the State’s UPK transition results in a 90 -100% loss of a center’s profits
• There will be substantial infrastructure costs to the state to replicate the existing preschool network (in the $ billions)
• As UPK moves into the public sector it will dramatically add to the State’s staggering pension fund deficit
• The net result is that only a small fraction of the pre-COVID child care centers will be able to survive
• This will cause widespread child care deserts for parents of children 8 weeks to 3 years old
• Child care costs for infants and toddlers will undoubtedly go up
• Lack of child care will cause problems for the workforce, who needs care all year outside of the 9:00am to 3:00pm hours provided by the public sector
• The lack of available child care will either drive parents to unregulated home care providers or reduce the labor market across the board

Why New Jersey’s current plan for UPK is a bad idea economically

• According to Rutgers NIEER Institute, New Jersey spends on average $13,172 per pupil for preschool each academic year – September through June from 9:00am to 3:00pm.
• Working parents will find this difficult to effectively manage work/life balance.
• Approximately 90% of state spending on UPK goes to teacher’s salaries.
• Current salaries must be factored into our future pensions and health benefits debt as a substantial fixed cost burden.
• Other then Washington DC, no other state spends more than $10,000 per pupil.
• New Jersey currently does not satisfy its constitutional level of adequacy requirements for children in K - 12.
• In 2019-2020 the number of New Jersey school districts that were funded below adequacy requirements rose to 187.
• Currently there are 96,903 three- and four-year old’s in New Jersey eligible for state funded full day preschool via three subsidy programs.
• In 2019-2020 only 54% (52,553) were enrolled at a cost of $692,241,537 to the state
• If all eligible subsidized children participated, the cost would be more than $1.2 billion per academic year
• The 2020 budget for preschool is $874 million.
• New Jersey has one of the largest achievement gaps between affluent and poor students
• If UPK actually encompassed all three and four year olds it would cost the state $2.6 billion per academic year
• There will be substantial learning loss to our students from the pandemic. Our school districts will need additional funding to address this issue.

 UPK via our public schools is an inefficient model.  Our school districts are already underfunded and falling short in supplying an education to the current demand of children they are assigned to serve.  Adding to that demand with another segment of the population which has even more variables will create an insurmountable social and economic imbalance

The solution to increased capacity and child care deserts is to pursue UPK by partnering with existing state licensed and highly regulated child care centers

The benefits:

• It provides a much-needed reliable revenue source to the State’s child care providers ensuring stability within the industry.
• It encourages child care providers to risk capital and expand into underserved areas, i.e. deserts.
• Preserves the significant income the state receives from this industry
• Eliminates the cost of recreating and already existing infrastructure ($ billions)
• It absolves the need to use Board of Ed funds and/or increase local property taxes
• Absolves the need to raise state taxes to compensate for this program funding
• It does not contribute to the State’s public sector pension fund deficit
• It allows local school districts to focus on their core mission of achieving constitutional K-12 mandates
• It gives parents the full day and year care options they need to be productive in the work force
• It gives parents the flexibility to choose their location based on what is best for their work/life balance not their residence
• It provides children with the same state mandated curriculum as the public schools
• Utilizes our state’s limited resources to concentrate on the neediest children via the CCR&Rs which is already in place
• It assures our most vulnerable children are in EPA regulated facilities since our current schools dangerously do not have environmental protections.

Important environmental considerations

• Private community based child care centers must adhere to 208 inspected regulations required by DCF for licensing

Licensing includes all provisions of Madden Law which assure all buildings and grounds are completely toxin free

• Children under the age of 6 absorb and metabolize toxins at more than double the rate of those that are older
• Children under the age of 6 are more susceptible to toxic damage based on their living zones and behavior
• All regulatory infractions must be abated immediately, or license is suspended or revoked
• By contrast, child care, preschools and after school programs in public school facilities licensed by DCF have only 97 regulations.
• Public schools are exempt from the Madden Law
• There are very limited environmental protections for students in public school buildings
• The average school building in New Jersey is 68 years old (1952)
• Schools built prior to 1978 likely used lead paint on walls, woodwork and windowsills
• Asbestos was used abundantly in building schools until the 1980s
• PCBs were not banned in the US until 1979. They can still be found in everything from caulking to ground soil.
• There is no safe level of lead. It is an irreversible neurotoxin that has permanent life altering consequences. 
• Lead in Newark’s drinking water is 4x the federal limit
• Public school children spend over 1,200 hours a year in school. Young children in child care spend even more
• Our current budget reduced spending on lead remediation across the state
• Of the 322 DCF licensed after school programs pre-pandemic, there were 693 unabated violations that were over 6 months old and another 83 that were 3 months old