NJEDA  Request for Information (RFI)

RFI Response-2020-RFI-OET-COVID19-Childcare-116 For Building the Resilience of New Jersey’s Child Care Sector

Response from Early Childhood Education Advocates, Inc.

1. Please provide information in your organization, group, government entity, or self and your capacity and qualifications as they relate to the business needs of child care providers

The Early Childhood Education Advocates (ECEA) is a mission-based organization that support the 4100+ New Jersey Department of Children and Families licensed providers who make up the child care industry throughout the State of New Jersey.  It represents the industry through representation, formal and informal, on or before government entities. It seeks to impact government decision making pertaining to the child care industry to the extent permitted by the Internal Revenue Code.

The ECEA is governed by a Board of Trustees:

Gaetano T. Falzarano , President and Treasurer. Gaetano (Guy) is the Founder and CEO of Lightbridge Franchise Company, LLC currently operating 53 child care centers in five States with another 30+ under development. There are 38 Lightbridge Academy’s operating in eleven counties in New Jersey. Prior to his role in the ECEA he was the Vice President of Government Affairs for the New Jersey Child Care Association. Guy has been operating Lightbridge Academy (formerly Rainbow Academy) since 1997 and is an active member of NJBIA’s Business Coalition during the COVID19 pandemic.  Contact: 732-980-1900, ext. 101

Bridget O’Brien, Vice President.  Bridget is the ECEA economist and the sole proprietor of SuperKids Child Care Center in Summit, New Jersey. She has been operating SuperKids since 2003. Contact: 973-699-8095

Karyn Jarzyk, Secretary. Karyn is the owner and operator of three Kiddie Academy franchise child care centers in Hamilton, Runnemede and Marlton, New Jersey She has been operating her centers since 2003. Contact: 267-980-4996

2. What is your experience with and understanding of the business capabilities of child care providers, both prior to and during the pandemic?

The Industry: The child care industry has been the bedrock of New Jersey’s economic development for decades.  The child care industry is the catalyst to both workforce productivity and the quality of our labor market by supporting working parents to pursue career and job opportunities. Pre-pandemic our state realized $8 billion in taxable income from parents who utilized our services.  The child care industry was also capable of significant financial contributions to our state’s budget. Pre-pandemic, the 4,100+ licensed private child care providers in New Jersey paid over $250 million in corporate taxes.  They paid over $100 million in real estate taxes and employed over 87,000 people-most of which were women.  And significantly, 40% of the industry’s revenue went back into New Jersey’s economy.  This translated to net contributions in excess of $4.1 billion annually to our state’s economy.  These factors serve as a testament to the business capabilities of licensed child care providers.

Uneven pandemic relief: The proficiency of child care providers has been even more evident during the pandemic.  Across the state, this industry has shown incredible dexterity and agility. Under the most strenuous of circumstances, providers responded to this national emergency by remaining open in the best interest of their communities, often at their own personal and financial peril.  Those providers who did not survive did not do so because they lacked business acumen.  Many circumstantial factors have allowed some providers to benefit from aid while structurally others were not eligible for available support.  For example, child care providers who predominantly serve families receiving child care subsidies, government run facilities, non-profit organizations and small centers.  All of these qualified for more government grants and funding than others.

During the pandemic, fixed costs for child care providers remained constant.  Staffing mandates forced variable costs to be artificially high.  And additional COVID-19 related extraordinary expenses were needed.  However, revenue was reduced by more than 50% across the board.  Simultaneously, policies were put in place that benefited those providers that received subsidies to continue financial payments regardless of whether children were in attendance.  This covered their operating expenses.  Likewise centers that are fully financed by government agencies did not experience operating losses.  And those who are non-profit organizations or had 10 or less employees were eligible for a plethora of additional funding grants not available to larger centers. 

Presumably, in theory, this policy was to protect the most vulnerable population. However, it was too specific a policy to support such a diverse statewide industry.  This diversity is not limited to just for-profit and not-for-profit entities . Some centers are singularly owned and operated while others , some are a part of a franchised network, while others are offered as part of a community or recreational program or through a religious institution.

Policies such as these left some businesses relatively unaffected, while others  had no choice but to close their doors.  Policies would better serve the industry simply by using a more formulaic approach with documentation like the Cares Act PPP loans/grants.  This also would more equitably be supportive of the market-based forms of child care which actually produce the highest measurable economic impact needed for our state’s recovery. 

3. Which key areas are you/your organization most qualified to address? (Choose all that apply)
1. Business training and technical assistance: The ECEA is not a training organization but does provide timely information to its members regarding legislation and regulations. We serve as an information conduit between legislators, regulators and our membership.
2. Establishing partnerships between child care providers: The ECEA can and does serve the industry as a whole by communicating changes to, or the creation of, new regulations and legislation. However, it is not a business broker and can not facilitate buy/sell agreements between businesses.
3. Access to capital (public and/or private) for child care providers See the attached “Addendum entitled “Why a contracted 2% profit model in child care is unrealistic and unsustainable.”
4. Other, please explain: The ECEA is child care centric, representing the interests of the industry from the perspective of the owner/operator and their employees. Its Board of Trustees and members are made up of child care providers throughout the State. Through them the ECEA brings a comprehensive understanding of the intricacies of the industry and its drivers.

4. What are the biggest challenges NJ child care providers face in their business operations and sustainability?

Describe challenges that existed prior to COVID-19 as well as new challenges that emerged due to the pandemic.

Challenges: The viability of the child care industry in New Jersey was problematic before COVID-19.  Over the past decade there has been a slow and steady encroachment on private community based child care providers via government initiatives and unfavorable policies for New Jersey’s businesses overall.  This has not only handcuffed our ability to operate, but more importantly it has disincentivized providers from creating new businesses, as well as halted growth and expansion of existing centers.  In turn, it  exacerbated the problem of child care deserts. 

Right now, the child care industry is facing a one-two punch.  COVID-19 is only the first punch.  Under normal conditions we are a low margin business with high fixed costs.  The child care industry is labor intensive so it cannot be streamlined or replaced by technology. Like other industries, COVID related reduced capacity is literally killing us.  However, when you add to that increased staffing mandates and reduced capacity directives, it is almost impossible to operate profitably.  Those of us that survive short term, will then face the second punch in the form of New Jersey’s push for Universal Pre-Kindergarten (UPK). It should be noted that the ECEA and the industry at large supports the goal of UPK. However, as currently devised New Jersey’s UPK program will destroy the child care industry. (See the attached addendum entitled “Recommendations to Fund Quality Pre-K Programs Effectively and Efficiently in Healthy Environments.”)

UPK today: Currently our state spends $13,172 per pupil for preschool each academic year.  According to NJDOE’s Division of Early Childhood Education only 49% of 3- & 4-year old’s who qualified for NJ Department of Human Services Division of Family Development (DHS/DFD) child care programming and were eligible for state-funded full-day preschool are being served.  This cost our state $692,241,537 in 2019 - 2020. If all eligible children participated, the cost would be approximately $1.2 billion.  Our current preschool budget is $874 million.   Disturbingly our current budget does not even contemplate addressing the children who are not counted because they live outside of “eligible” districts. Not surprisingly, New Jersey is considered to have one of the nation’s largest achievement gaps between affluent and poor students. It is our belief that all 3- and 4-year-old children can be served if state lawmakers are willing to revise the current method of UPK funding and concentrate on the vulnerable families first.  To do this the state needs to focus on the children in need regardless of their residence and stop focusing on funding the school districts based on their buildings’ capacity or superintendent’s willingness to expand his/her area of responsibility.

As budget dollars flow from the State to the Department of Education, the DOE then allocates money to individual school districts to implement a UPK program.  Sometimes the district relies on private providers to deliver the service to 3 and 4 year-olds and other times they provide the service directly through existing school facilities and public employees.  When private providers are used, the mandated DOE regulations make it very difficult to operate and impossible to make a profit (see the attached addendum “Why a contracted 2% profit model in child care is unrealistic and unsustainable”). 

When the district provides the UPK service internally, without the use of private providers, they effectively suck the 3- and 4-year-olds out of the market. This ostensibly reduces our businesses by another 40% as 3 & 4year-olds are shifted to the public sector. While this is devastating to the private provider it also comes with substantial infrastructure costs and adds to the State’s already staggering pension fund deficit through the increased utilization of public employees. 

As UPK grows throughout the state, providers will not be able to sustain themselves serving only infants and toddlers. Due to the very stringent ratios for infant and toddlers, licensed child care providers need three and four year old classrooms to balance the costs of this care.  For infant and toddler rooms to produce a net profit, parent tuitions would need to increase beyond market sustainability, or the State would need to subsidize centers to keep them financially viable. A typical 10,000 square foot child care center would have a Director, and Assistant Director and possibly an Administrative Assistant working in the office.  It could have nine classrooms plus a multi-purpose room (* which would be used throughout the day by the children in full-day programs and for after school latch-key programs from 4:00 to 7:00 pm) and would be licensed for 154 to 174 children with the classroom distribution as follows:

                                           #  of          Licensed         Staff/Child       F/T      P/T      Total

                                    Classrooms     capacity           Ratio               Staff    Staff    Staff

Young infants                          1          12                    1:4                   3          2          5

Mobil infants                           1          12                    1:4                   3          2          5

Total infants                            2          24                                            6          4          10

Young toddlers                       1          18                    1:6                   3          2          5

Older toddlers                         1          18                    1:6                   3          2          5

Young or Older toddlers         1          18                    1:6                   3          2          5

Total toddlers                          3          54                                            9          6          15

3-year-olds                              1          20                    1:10                 2          1          3

3-year-olds                              1          20                    1:10                 2          1          3

4-year-olds                              1          20                    1:12                 2          1          3

4-year-olds                              1          20                    1:12                 2          1          3

Total 3 & 4’s                            4          80                                            8          4          12

Total full-day programs           9          154                                          23        14        37

Multi-Purpose room*               1          20                    1:15                 0          2          2

Administration team                                                                            3                      3

Total center operations           10        174                                          26        16        42

As you can see, the infant and toddler programs require 68% of the hourly staff to operate and they account for 68% of the hourly payroll expense.  The staff serving 3 & 4-year-olds account for 32% of the hourly payroll expense.  Conversely, infant and toddler programs generate 52% of the Gross Income while 3- & 4-year-old programs 48%. Typically, payroll expense represents 45 – 50% of Gross Income.  Rent/taxes and facility maintenance constitute an additional 16 – 18% of Gross Income.  Other general expenses including insurance, food, janitorial, toys and classroom supplies, office supplies and equipment leasing comprise 20 - 25% of Gross Income.  The remaining 7 – 19% of Gross Income goes to profit.  A center’s level of efficiency in all areas of operations will determine which end of the scale the profit margin sits.  However, the example above is based on 100% occupancy.  Centers usually operate at 70 – 85% occupancy.  However, at that level payroll is not much reduced as two teachers are still required to run a Pre-K room even if it operates with 13 children.  Unless a center is operating at near or full capacity, it is difficult to earn a profit at all.  Pre-COVID centers operating below 70% of occupancy where typically struggling financially.  If the revenue from 3- and 4-year old’s disappeared due to the State’s UPK program, centers would not be able to fill the excess room capacity and if they could with infants and toddlers their profit margin would evaporate due to the higher operating costs to run those programs.

Realistically, only a small fraction of the existing providers will be able to survive long term.  This will cause widespread child care deserts all across the state for parents of children 8 weeks to 3 year-olds, and prices will undoubtedly have to go up.  It will also certainly cause problems for the State’s workforce, who need care outside of the 9:00 am to 3:00 pm school-day, September to June academic year. As this transformation occurs it will reduce our labor market across the board.  During the pandemic, 39% of our working parents either quit or reduced their jobs because of child care issues, disproportionately affecting women-particularly Latina and Black women.  The hardships won’t end there though because the 4,100+ licensed child care centers who employ over 87,000 people and  contribute $4.1 billion to our state’s economy will disappear. 

How do we solve this problem?  Short term with policies that support the child care industry and grants to cover the COVID-19 related losses.  Long term to pursue UPK by partnering with existing “highly regulated” licensed child care centers as is done in other states like Florida and Georgia.  The Florida system works like our Community Resource and Referral agencies (CCR&R’s). It is a voucher system.  There is an allocation per child.

Using CCR&R’s to serve the neediest: There should be one funding stream for preschoolers eligible for UPK and it should flow from the State Treasury to the impacted students, not the school district. The most fiscally prudent way to do this is through the Division of Children Families county-based Child Care Resource and Referral agencies (CCR&R).  The CCR&R’s act as a conduit, connecting state/federal funding to the eligible child in need of preschool programming and services.  For decades the CCR&Rs have been an effective vehicle for administering funding that flows through DHS/DCF to child care providers delivering community-based programming and services.  It is also the same system currently used for child care subsidies so providers are already familiar with this process. There is no reason the same infrastructure cannot be used for UPK funding.

This solution provides preschool universally through an existing infrastructure which is already in place and ready to go almost immediately.  If the goal is to get our state into a period of recovery, then this solution provides the foundation socially and economically for New Jersey to get back to business.

Benefits: The benefits are many and consistent with our goals for economic recovery:

• This approach preserves the tax revenue from this large industry to our State.
• It assures that children are in EPA mandated facilities since our public schools dangerously do not have equal EPA regulations.
• It assures that children are in New Jersey Department of Environmental Protection and New Jersey Department of Health approved facilities where surfaces, air, water and outdoor play areas are completely free of environmental contaminants that have proven to cause permanent developmental delays in children under the age of six years old.
• It eliminates the costs of recreating an already existing pre-k infrastructure, which would be many billions of dollars.
• It would remove the Department of Education from the child care equation allowing it to focus on its core mission of K – 12.
• It would absolve local school districts from the oversight and funding of programs outside of their K – 12 mission.
• It would reduce the need to increase local taxes, which will most certainly be needed for the K-12 educational deficits caused by the pandemic.
• It gives parents the care schedule options they need to be productive in the workforce.
• It gives parents the flexibility to choose centers most convenient for their work/life balance, not just based on where they live – where their school district is.
• It can provide children with the same state mandated curriculum as the public schools.

This proposal achieves the goal of New Jersey’s economic recovery and the sustainability of this essential industry., It assures the educational opportunity for those most in need at only a fraction of the cost of the current system. It also provides the incentives needed to encourage private providers to enter the marketplace in areas that are under-served as it provides stability of income to risk the capital needed to open new centers.

5. What barriers do child care providers face in accessing public and private capital? Examples include state cc subsidies, NJEDA small business grants and loans, Paycheck Protection Program, DHS COVID-19 Provider Grants, and/or private loans through banks or Community Development Financial Institutions (CDFIs)

Market based child care models are primarily owned and operated by women. Their largest obstacles relate to external business financing.  This is especially true for mid and large size centers that have capacities of 100 children or more.  As mentioned above, capital is not universally available to all versions of child care in our state.  There is a clear bias to public school programming, which also has the ability to raise funds through their local tax base or non-profit organizations who get the lion share of government grants.  Market based child care centers that do not serve subsidy children are routinely not eligible for state and federal grant funding.  In addition, while considered small businesses by most metrics, many child care businesses are too large to qualify for most of the small business grants and loans that have been available during the pandemic.  Private loans from banks and debt in general are also problematic to these businesses. The child care industry is a low margin business and in many cases would not support a business plan to obtain bank debt unless centers can demonstrate income stability   The policies of private bank financing usually require additional personal financial liability and responsibility as collateral for loans.  This is rarely a viable option for child care center owners whose only collateral is their business and possibly their home.   If debt is necessary for a provider to remain in operation, then a low interest government loan program similar to programs for education would be the most effective.  On the other hand, the Cares Act PPP program was very helpful to all forms of child care providers and all across the state because it equitably funded businesses proportionate to their operational needs. However, this was a short-term solution to get over the COVID crisis. 

During this pandemic the most difficult issue child care providers faced was the lack of clear information from funding entities, as well as a consolidated menu of options.  While the ECEA provided continuous Eblasts to its members on a variety of topics including changing regulations, sanitization procedures, government programs, to name a few many providers used community social media sites to disseminate information and help each other navigate through the requirements and deadlines.  Moving forward it would be very helpful if there was a central portal specific to child care providers for funding opportunities, grants, loans and subsidy programming both public and private similar to what has been set-up for the Business Action Center and COVID -19 information access.  Every center licensed by DCF should automatically be enrolled in this portal at licensing.  It should also have a notification system as new opportunities arise.  This type of system creates equity within the industry and entices participation from the many smaller home-based centers which are often left out of state oversight and do not contribute to our tax base.

The bottom line is child care providers need capital to expand into underserved markets.  Lenders need guarantees that debt will be repaid.  Shifting UPK to private providers under the method outlined above will give lenders the assurances they need to fund that expansion.

6. Some providers and intermediary agencies throughout NJ have established shared services models to consolidate administrative functions. Can you comment on the benefits as well as the challenges of implementing these models, including any barriers that may exist to establishing partnerships between child care providers?
   
   There are many barriers to partnerships when you have a mixed delivery system of market based, government operated, non-profit, small and large entities.  The most obvious is the diverse funding of these businesses and establishing an equitable cost structure for shared services.  That being said, universal government services, programs and policies that support all child care entities could help to standardize quality and alleviate financial burdens across the industry which would also encourage expansion of the industry.  For example:
   
   
   • State sponsored training programs and services for both directors and staff members.This could be in person, live zoomed or even online as schedules permit. 
   • Scholarships for formal early childhood education and CDA programs which would enhance the quality of the workforce.
   • Universal business tax credits or tax-free status for supplies.This would promote growth and attract new businesses to the industry.
   • Tax credits for those who work in child care businesses. This would attract employees and give teachers/caregivers higher take home wages commensurate with their job responsibilities.It would also keep child care costs down as it alleviates the need to raise rates charged to non-employee parents who are covering the cost of whatever discounts the center is providing to its employees.
   • The option to participate in state pooled business and health insurance policies, which could reduce overhead costs and reduce financial barriers to expansion.

7. Can you comment on any specific regulatory barriers that child care providers face, both in starting a new business, as well as, expanding their existing operations? How could these be addressed and improved? 

There is no doubt that any industry with market-based models promotes economic growth.  Adding formal business entities tracked by state and federal taxing authorities also means they are adding to our state’s revenue.  For COVID-19 recovery we desperately need economic development and tax revenues.  We also need to solve the issue of child care deserts in New Jersey to increase our labor participation and equitably provide parents employment opportunities in all regions of the State. Therefore, it is in the best interest of the whole State that we promote and attract market based child care businesses.  However, private child care entities are at a disadvantage compared to public school entities because of unequal operating regulations which discourages the entry of new or expanding existing businesses.

Private vs. public sector environmental regulations: The child care industry in New Jersey is open 240 days a year, typically from 6:30 am to 7:00 pm.  They do not operate on the public-school calendar with summers off, multiple weeklong breaks and extra holiday closings.  They provide the highest quality education, in the safest facilities, specifically designed for children under 6 years old.  Community based private child care providers are also regulated by government agencies with the strictest guidelines for the education, health, safety and development of children.  Private licensed child care centers must adhere to 208 inspected and costly regulations required by DCF for licensing.  Licenses are suspended or revoked without immediate remediation.  This includes New Jersey’s Madden Law (P.L. 2007, c.1), which requires private DCF licensed centers to test air, water, soil and surfaces of the entire building, all property, and contiguous structures near their location to assure they are completely toxin free.  A “No Further Action” letter must be submitted from the DEP before any operation commences.  The environmental protections afforded under Madden Law are one of the strictest in the country.

By contrast, child care, preschools and after school programs in public school facilities licensed by DCF have only 97 regulations. Most alarmingly public-school oversight does not include Madden Law requirements.  Pre-pandemic, of the 322 DCF licensed programs operating in public school facilities there were 693 unabated DCF violations over 6 months old and another 83 that were three months old.  The ECEA and the industry at large are not proposing our regulations should be reduced.  On the contrary, they are justified and needed to protect our children because children under the age of 6 absorb and metabolize toxins at more than double the rate of older children.  Children under 6 years of age are also more susceptible to toxic damage based on their living zones which are closer to the ground and their hand to mouth behavior.  However, what hinders private businesses from entering this market and solving the child care desert dilemma is public policy which gives some competitors in the market more lenient regulations and oversight at the expense of our children’s health and well-being.

Public school facilities: The average school building in NJ is 68 years old (1952).  Asbestos was used abundantly in building schools until the 1980s.  PCBs were not banned in the U.S. until 1979.  Contaminants can still be found in everything from caulking to ground soil.  Schools built prior to 1978 likely used lead paint on walls, woodwork, and windowsills.  There is no safe level of lead.  Lead is an irreversible neurotoxin that has permanent life altering consequences.  Public school children spend over 1,200 hours a year in school.  Young children in childcare spend even more time in centers. Remarkably our current state budget reduced lead remediation across the state, even though cities like Newark has drinking water that is 4x the federal limit.  This is a very dangerous situation.  And our policies are discounting public facilities operational guidelines to hide the expense of remediation.  From both a public health and an economic perspective the answer is clear.  Policies that promote highly regulated market-based providers is the best solution for New Jersey. 

8. Can you comment on the demand for and barriers to providing child care services during non-traditional hours) weekends, evenings, overnight)?

   In the past, when New Jersey had manufacturing plants operating three shifts, seven days per week child care for those workers may have been in demand.  However, today manufacturing has pretty much left the State for lower cost markets.  The only area of the State that may need non-traditional child care hours could be the Atlantic City casinos.  They operate 24 hours per day, seven days per week. Regardless of the market and the circumstances, if there was demand for child care operating in non-traditional hours the following barriers would exist:

   • Child care centers currently operate on a 10 ½ to 12 hour work day where staffing is always a challenge. If that time of service where extended, there is a good chance that the additional hours would be in the form of overtime.This would undoubtedly add to labor costs but not necessarily result in higher tuition rates thereby reducing already slim margins.
   • Larger centers would have to add more shifts and as a result would add to the total number of employees working within the business.A typical 10,000 square foot facility would employ 35 – 40 full and part time employees.  If that employee base grew to more than 50 full-time employees that business would be subject to more stringent employee work benefits requirements. 
   • Centers operating 24/7 would have additional cleaning requirements which would most likely require internal employees to deliver the level of service needed to operate effectively.This would add to the employee count issue outlined above.
   • Providing overnight service is different than running a regularly operating center 10 ½ to 12 hours per day.It would be more disruptive to children’s sleep patterns and would require the center to serve three meal per day.

   While these barriers are real, they are not so burdensome as to preclude a provider from offer non-traditional hours of service if the demand existed.

9. COVID-19 has created significant challenges to child care providers, including increased costs to meet new health and safety guidelines such as purchasing PPE, as well as, having to shift to reduced class sizes to meet social distancing etc. From your experience how are child care providers addressing these challenges?  Can you comment on areas of unmet need?

Child care providers across the State have risen to every new challenge presented by this pandemic heroically.  Health and safety guidelines were easy.  The child care industry as a whole pre-pandemic was already expert in contagion mitigation.  Finding PPE supplies has also been less of a challenge than expected.  The same holds true for policies like temperature checks, limiting parent access to centers and administrative reporting.  However, additional debilitating costs and decreased capacity make it impossible to financially operate long term.  Classrooms that are licensed to operate with 20 children are now reduced to 15. Staff cannot be shared between classrooms and children cannot be grouped together to realize pre-pandemic operating efficiencies. There is no scenario where child care centers can operate with 25% less capacity and 50% more costs. Numerous studies estimate that over 50% of the child care industry will close their doors due to the pandemic. Unfortunately, the obstacles for re-opening after the pandemic are also significant.  Parents will have found alternate care options, staff will have found other jobs, buildings will have been repurposed, etc.   For the vast majority of licensed providers in the short term it will all boil down to funding grants which equal the cost of COVID-19 mandates. In the long term, it will be assurances that public policies will be conducive and supportive to the market based child care industry.  Without this affirmation child care providers will have no incentive nor commitment to resurrecting, much less expanding their businesses.  We cannot have economic growth without a market based child care industry.  Supporting and promoting the child care industry is our state’s most effective vehicle to economic growth.  We are the trifecta for successful recovery: 1) the child care industry plays a foundational macro-economic role in our state’s economy 2) we support labor force quality and productivity and 3) we encourage regional economic growth and development. 

10. Can you comment on the particular business challenges facing different types of child care providers, as well as any targeted strategies that could help address them?

    1. Family/home based child care providers: The ECEA advocates for the 4100+ licensed child care providers in New Jersey. We do not represent family/home based providers. However, we believe there could exist an opportunity to expand family/home based providers through collaboration with, or through the extension of center based child care providers.  The vast majority of family/home based providers operate independently, without license, regulations, or oversight. State law limits them to serve no more than five children, six if one is their own.  Many operate without proper training, insurance, or basic business acumen.  In fact, many family/home based businesses are not even businesses because they are not recognized as such, i.e. not reporting income tax to the State or Federal Government.  There are literally thousands of these entities in operation today.  While the State has attempted to identify them through a registration process, many remain underground.

    We believe that if the proper incentives where created, the State could rectify some or all of these concerns and encourage licensed providers to expand into this market.  Licensed providers could set up satellite family/home centers in affiliation with home care providers if they were allowed to increase the number of children served to 7 or 8.  This increase in customers could be justification for a family/home care provider to come out of the shadows and legitimize their business.  It would also provide center based providers the opportunity to expand into new and unserved markets providing additional needed revenue. This structure would:

    • allow family/home care providers to essentially become an extension of the sponsoring licensed child care center.
    • make the family/home care provider an employee of the sponsoring center.
    • provide training and operational support through the sponsoring center.
    • bring the family/home care provider out of the shadows and become a tax paying member of society.
    • Cover the family/home care provider with the liability insurance from the sponsoring center
    • provide the family/home care provider with a support network through its sponsoring center providing:
      • early childhood education training
      • substitute capability when the family/home care provider is ill or needs a vacation
      • proper business accounting support
      • marketing support
      • give parents peace of mind that their child is in a small setting environment but supported through a licensed organization

    While there are many details to work out to even see if this is a viable opportunity for both center based and family/home based providers, it can all start with how the State approaches the issue.  We believe it should be a program of limited realistic regulations, with the needed incentives to encourage significant participation.

    1. Center based child care providers: See responses to questions 2 – 9 above

    2. Providers in Opportunity zone communities: In many cases Opportunity Zones are also locations affected by the 1995 Abbott ruling mandating 3- and 4-year-olds be provided Pre-K educational services via the public sector. While this ruling has achieved its goal of providing this educational service it has done so at an enormous cost to the State’s taxpayers and has effectively decimated the child care industry.  See the arguments for UPK through CCR&R’s to private providers in the response to question # 4 above.

    3. Providers who speak a language other than English: Child care needs and cost structures are fundamentally the same regardless of the language used in a center. We don’t see this as changing the dynamics of center operations within the context of the center unit. However, we believe that centers that only speak a language other than English is effectively creating a situation that disadvantages the children served. To be an effective member of society, children need to be able to speak and write in English.  Providers who only speak another language put themselves at an extreme disadvantage in their ability to access training, capital, operational and marketing resources.

    4. Providers with limited computer access, internet connectivity, and/or digital literacy: See our response to questions # 4 – 7 above. In brief, limited computer access is a function of capital which could be resolved by guaranteeing providers the income from servicing 3- and 4-year-olds through the proposed UPK model outlined in # 4 above.  Internet connectivity is a function of the State’s telecommunications infrastructure and for the most part widely available throughout the State and is not within the purview of this discussion. Digital literacy is fundamental in today’s society.  This requirement will only increase with time.  State funded training programs for providers to acquire the skills necessary to navigate the technological world we live in will help bridge this gap, if it exists.  We believe digital literacy is a function of and dictated by capital resources.  If the business is viable, capital will be available and digital literacy will follow as it is a necessity to run a business. More importantly, we believe that a basic understanding of accounting, marketing and operations are the fundamentals to operating any business.

    5. Providers that operate independently: It is getting harder and harder to run an independent child care center. Increased business regulations, i.e. minimum wage, employment laws, reduced margins and limited capital are barriers to independent business owners regardless of the business they are in.  Add the regulations to operate a child care center and many providers are finding it very hard to keep up. As such, we are seeing a consolidation within the industry where independent operators are retiring or selling their businesses to larger operators either due to COVID, increased regulations or the inability to adapt to the challenges they face.

    6. Providers that are part of a chain or network comprising multiple locations: Multi-unit operators have all of the same issues to deal with as outlined in # 10 F above but have the ability to spread compliance costs over more operating units. We are seeing more multi-unit and franchise operators operating in the more lucrative sections of the State.  This makes sense as the margins are somewhat higher, they have more capital at their disposal and more choices in where they will operate. We fully expect this trend to continue as pressure builds for independent operators.

    7. Providers that offer non-traditional hour services: See our response to question # 8 above

11. What are specific support that could help build the business capacity of child care providers. What specific skill sets would be most helpful to offer support on?

In addition to the proposal on how best to deliver on the promise of UPK outlined in the response to question # 4 above historically, lower income families have the least access to formal care settings.  In addition, child care costs have put a tremendous burden on middle income families.  We all know that when families thrive, children thrive.  But policy makers rarely take the next step to promoting family support. The most effective overall support for everyone; the child care industry, our struggling middle class families and our lowest income households would be to implement financial programs that support families via tax credits, child allowances or child care subsidies.  Additionally, as the majority of the child care providers are women, it would be advantageous to them and society as a whole to develop programs that encourage entry into the child care business either through center based or family/home based businesses.

12. How can NJEDA and its partners help child care providers increase their access to public funding and private capital, including loans?

People have long surmised that our private community based child care industry was an important part of our community.  However, it wasn’t until this pandemic and contemplating our reopening that we were forced to rank industries by necessity.  What has come to the forefront is that child care is pivotal to society and our economy, certainly equal to transportation and housing.  Although even our transit system cannot function without employees who are now forced to stay home due to lack of child care. 

Urban planners have always realized that society depends on infrastructure.     Possessing a solid transportation infrastructure has always been a crucial component to economic development.  Federal and state governments have long recognized this and have supported transportation infrastructure as a priority by building roads, railways, busing systems airports and by financially subsidizing transportation systems. Child care is an equally important foundational infrastructure industry sector, which serves both private and public needs.  Child care is a $1.9 billion revenue industry that returns 41.7% of its revenue back into the economy which translates to a $4.1 billion economic engine for the state. 

By contrast NJ Transit in 2019 had operating revenue of $1.059 billion and a $2.089 billion operating loss resulting in a $1.831 net loss to our State.    Yet remarkably our government found our public transit system so essential to our infrastructure and economy that they were granted $1.43 billion in CARES act funding.  Child care should be prioritized in the same vain with equal financial backing and policy support from our State.  

13. What role can the state play in facilitating partnerships between child care providers? Are there strategies that could strengthen partnerships?

1. Among center-based child care providers: The most dramatic way the State can work to provide public/private partnerships is to change the funding and direction of its UPK program as suggested in response to question #4 above. This would provide the incentives providers need to invest in markets that are underserved.                      
2. Among family/home based child care providers: The ECEA advocates for the 4100+ licensed child care providers in New Jersey.  We do not represent Family/home based providers and therefore cannot comment.
3. Between the two types of providers (center and home-based): This is difficult to answer as home care providers and center-based providers to the best of our knowledge do not typically communicate let alone collaborate. The center-based providers are a more structured consortium as they have common regulations and advocacy groups supporting them.  This is not the case with home-based providers who are not regulated or part of organized groups. However, we believe there are opportunities for center and home- based providers to collaborate (see our response to question #10 A above).

14. What structure and length of training or technical assistance would be most helpful to bolster the business skill sets of child care providers?

Several years ago, the State attempted to establish a “Stars” rating system in conjunction with its Grow NJ Kids initiative. The program was suspect within the industry as it automatically rated public school run programs with three stars where it took private providers significant effort to achieve that level.  It created reporting requirements for each child that is prevalent in the public sector but time consuming and costly in a child care setting. This was viewed as biased against the industry due to the increased workload requirements and the blatant disregard for children’s safety due to all of the environmental issues outlined in response to question # 7 above. Quite frankly, and generally speaking, licensed private child care providers are better equipped with safer facilities than the public sector to deliver effective child care services to the State’s work force. Additionally if the “Stars” program is a realistic objective then public sector facilities should be treated equally with center based child care centers and should receive negative stars when their facilities don’t meet environmental regulations that child care centers are required to meet.

We believe providing proper incentives to receive training by encouraging providers to expand facilities is the best way to get people to elevate the quality of their business.  Stop threatening child care providers businesses with publicly funded competing services and start developing public/private partnerships to encourage new growth into the industry.

15. What strategies should be considered to help child care providers who speak a language other than English to access training and technical assistance opportunities?

While we believe this is a somewhat limited issue within the State’s child care industry, we do not have any experience in this matter and it would be inappropriate to comment.

16. Are there models from other states or localities that New Jersey should draw from to support the business needs of the child care sector?

Using the subsidy system through the resource and referral agencies to provide parent choice at community early education programs ensures that the state utilizes the funding already expended to establish reliable systems for supporting families as well as quality programs.

The resource and referral agencies have a long history in child care; understanding the landscape, supporting families, and enhancing the quality and accessibility in child care. The resource and referral agencies have established relationships with human service organizations, funders, child care providers, stakeholders and the Division of Family Development, Office of Licensing. They act as a liaison between organizations, the state, and the local community. As funding opportunities present to expand early childhood education and to support families in times of crisis, the resource and referrals are an established and funded vehicle for disseminating information and funding to providers, families and the community. Some advantages of utilizing this established system include the following:

1. 
   A. Parent Choice: Utilizing the voucher system allows families to choose the provider of their choice. As New Jersey has evolved to provide more parental choice for children grades K-12, continuing to allow families to choose providers that meet their philosophies, schedules, and localities means that we are supporting families in making choices that strengthen the family and alleviate stress.
   
   B. Emergency Child Care Situations: Child care providers were the sole choice for essential workers during the height of the pandemic. Essential Worker families who were participating in public school and other options needed to change placement in order to continue providing essential services during the pandemic. This disruption of care was especially traumatic for children with special needs and families who were already at risk. Providing families with choices allows them to choose care that may be open in emergency situations.
   
   C. Continuity of Care: Utilizing programs that offer services 6 hours a day, 180 days of the year, means that young children of working families must utilize wrap-around services. Families must choose alternate care for before care, after care, summers and breaks. This is stressful for families and means that our youngest children do not have the continuity of adult caregivers, routines and structure that is so imperative to the developing child.
   
   D. Prevent Child Care Deserts: By supporting the existing child care infrastructure of serving infants through 4 year olds we are ensuring care for infants and toddlers. Most programs cannot survive or thrive while supporting infants and toddlers alone. Quality care for these children often exceeds viable tuition. Programs can maintain quality programming because of the viability of the preschool programs. When preschool funding is redirected to other programs, many community child care programs are forced to close causing child care deserts for infants and toddlers.
   
   E. Targeting funding to families that are currently in low income and ALICE status: the subsidy/voucher programs allows our state to streamline funding to families who are currently living in low-income and Asset Limited Income Constrained Employed (ALICE) families. There are well defined procedures to processing applications, determining income and activity requirements. These requirements can be adjusted to meet larger and more diverse households ensuring that funding is meeting the households most in need and is redirected from households where there is no economic need.
   
   F. Opportunity to provide holistic services: The resource and referral agencies are now funded to provide Family Engagement Specialists' services. These are trained personnel who meet with each new family to support the family in a holistic approach. Families participate in a short assessment and work with the Engagement Specialist to determine needs such as housing, food, education, civic engagement, employment and other supports that help families to thrive. The Engagement Specialists reach out to families a few times a year to check on current needs and supply referrals and support. These services mean that families are better supported in a nonjudgmental environment. We know that when we strengthen families, we help prevent child abuse and neglect.
   
   G. Grow NJ Kids: The states' large investment in Grow NJ Kids, New Jersey's quality rating and improvement system means that the early childhood community is situated and funded to offer quality early education experiences. Research based curriculums, environment rating tools, trained support specialists, professional development and financial supports are all provided to ensure quality experiences for children and families.

Addendums:

• New Jersey Child Care Industry Fact Sheet
• Recommendations to Fund Quality Pre-K Programs Effectively and Efficiently in Healthy Environments (UPK White Paper.)
• Why A Contracted 2% Profit Model In Child Care is Unrealistic and Unsustainable