A Modern Economy Depends on Child Care. Montana Can Make It Affordable and Accessible.

May 2021

Child care is a critical component of a modern and thriving economy. High-quality and affordable care is essential for parents to stay in the workforce. Businesses across all sectors need workers who have a safe and reliable place for their children during the day. The coronavirus pandemic highlighted how important child care is and the complex challenges the system faces across the country. Child care businesses operate on narrow profit margins, often struggle to pay adequate wages, and have high staff turnover. However, this long undervalued industry played a key role in reopening, allowing businesses to recruit and retain workers.

Even before the pandemic, Montana lacked adequate child care for years. In 2017, Montana ranked in the bottom five states for access, meeting only 41 percent of the demand.¹ Affordability has also been a problem as families struggled to pay for child care for years. Families paid between $7,900 and $9,100 for child care in 2016, more than the cost of in-state tuition at a four-year public college.² The affordability situation has not improved. In 2020, families paid between $8,400 and $9,500 for child care.³

In 2020 and 2021, Montana received more than $200 million in federal relief money to support child care and early childhood education, which includes the most recent $111 million from the American Rescue Plan Act.^4-11 During the 2021 Montana State Legislature, policymakers sponsored seven bills related to early childhood care.¹² The two successful bills increased the number of children in licensed, home-based care and allowed candidates campaigning for office to utilize campaign contributions for child care.¹³ A better child care system is in reach for Montana. To get there, policymakers should focus on long-term solutions and balance the needs of families and child care businesses.

Access: Many Families Cannot Find Licensed Child Care Providers

More than 74,000 children under age 6 call Montana home, and 67 percent of these children have all parents in the workforce.^14,15 Children younger than age 6, particularly those with all parents working, likely need some type of child care before attending school. However, 90,500 school-age children in Montana (ages 6 through 12) may also need care before or after school.¹⁶

In 2020, Montana had 1,269 licensed facilities providing 22,531 slots for children ages 0 to 12.^17,18 Head Start programs in Montana also provide care to young children. Head Start programs can be licensed by the state, and those programs are included in the state-reported data. Other programs are not state-licensed but do meet health and safety standards set at the federal level. Head Start served 5,755 children in Montana in 2019.¹⁹

The current supply of licensed child care does not meet the demand. In 2020, there was one licensed child care slot for every three children under age 6.²⁰ Accounting for the additional Head Start enrollment in 2019 increased the supply to meet 35 percent of demand.²¹ Another way to measure the number of children needing care is to count only those children with all parents working. Using this measure, the current number of licensed child care slots meets about half (48 percent) of the children needing care.²² This same measure incorporating the Head Start enrollment in 2019 bumps up to 56 percent.²³ Meaning that at most, the supply of child care opportunities in Montana meets just half of the demand. It is important to use both measures of demand to assess the current child care supply for two reasons: 1) the number of parents working is only an estimate provided by a survey from the U.S. Census Bureau, and 2) more parents may choose to work if there were better access to care.

While all areas of Montana face a lack of child care supply, the issue is more pronounced in rural and tribal communities. In Montana, six counties lack even a single licensed child care provider: Carter, Fallon, Golden Valley, Petroleum, Treasure, and Wibaux.²⁴ On average, rural counties have child care for 23 percent of children with all parents working, compared to 38 percent for moderately rural counties and 43 percent in the least rural counties.²⁵ Each tribal nation within Montana, except for the Little Shell Chippewa Tribe, operates a tribal Head Start program that collectively enrolled 1,927 children in 2019.²⁶ On average, tribal Head Start programs provide care for 55 percent of children under age 6 with all parents working who live on one of the seven American Indian reservations within Montana.^27,28 Through Head Start, tribal nations provide critical access to child care for families living in reservation communities, offering evidence-based and culturally relevant early education to a group that has faced generations of limited access to social and economic resources.²⁹ Across all of Montana, children of color make up the majority of Head Start enrollment (53 percent compared to 21 percent of the population in Montana), underscoring the importance of Head Start for historically marginalized communities.^30,31

Families in need of child care for infants and toddlers (age 0 to 1) find even fewer options. The current supply meets 39 percent of the demand for infants and toddlers with all parents working.³² Child care providers spend more when caring for infants and toddlers to cover higher staffing needs and additional supplies. The higher cost burden dissuades many providers from offering infant and toddler slots, leaving families of young children to navigate waitlists or make difficult decisions on how or if to return to work.

The shortfall worsens even further when adding in school-age children who need before or after-school care. Much of the data for supply and demand focuses on children under age 6, but Montana likely faces a lack of child care for school-aged children as well. Estimating child care need for school-age children is more complex. However, many licensed child care facilities do provide care for school-age children.

The numbers are clear; the current supply of child care does not meet the needs of Montana families. Parents unable to find a licensed child care facility for their children may turn to unlicensed care that does not provide the same reliability or health and safety standards. Parents may also be forced to drop out of the workforce without access to care. This has been particularly evident during the pandemic, where mothers of young children left the labor force at a higher rate than women without children.³³ Labor force participation for mothers with young children dropped 7 percentage points between 2019 and 2020 in the three-state region of Montana, North Dakota, and South Dakota.³⁴ Inadequate child care also impacts businesses. When workers cannot access child care, businesses experience lower productivity and struggle to recruit and retain workers. A recent analysis estimates that inadequate child care causes Montana businesses to lose $55 million while parents miss out on $145 million in wages.³⁵

Quality: Not All Available Child Care Is High Quality

High-quality child care provides a safe and nurturing environment for children, involves their families, and creates a supportive environment for workers. Licensed facilities meet basic health and safety standards set by the state, establishing a baseline standard of care. Little is known about unlicensed facilities; however, they exist in Montana. The U.S. Economic Census records businesses that report income as child daycare services. More than 900 businesses report income from child care than are licensed with the state.³⁶

Child care facilities that provide high-quality care go above and beyond licensing requirements. Providers in Montana can participate in a voluntary quality rating and improvement system (QRIS, also called “Best Beginnings STARS to Quality”). Providers advance through five rating levels as they demonstrate improvement on employee qualifications, training, and professional development; supportive learning environments for children; and engagement with families. A provider at QRIS level two begins receiving financial incentives and an increased scholarship reimbursement to use for continued improvement.

More child care providers participate in QRIS than they did five years ago. Despite the steady improvement, a clear gap still exists in the availability of high-quality child care slots. In 2020, 37 percent of child care slots were at a facility participating in QRIS, up from 16 percent in 2014.^37,38 State advocates consider reaching QRIS level three as a benchmark for high-quality care.³⁹ Only 12 percent of licensed child care slots met a rating of three or higher in 2020.⁴⁰

Child care providers must invest time and resources to offer high-quality programs, and it can take a year or more to move through one QRIS level. Montana needs solutions that encourage more providers to participate in QRIS in addition to ongoing support for current high-quality providers to maintain high standards of care.

Affordability: Parents Often Cannot Afford Child Care and Child Care Businesses Struggle to Stay Open

Montana families struggle to afford child care. On average, families pay $9,518 per year for infant care and $8,365 per year for 4-year-old care, making child care more expensive than college tuition at a four-year public college.⁴¹ This means a household making $57,200 spends 17 percent of their income on infant child care.⁴² The Best Beginnings Child Care Scholarship provides money towards these costs for families with lower incomes. In 2020, more than 7,000 children received a child care scholarship.⁴³ However, more eligible children could benefit from the program than are currently participating. Estimates from the U.S. Census Bureau show that 30,000 children live below the income guideline for Best Beginnings eligibility (less than 185 percent of the federal poverty level, or less than $40,626 per year for a family of three).^44-46

Child care businesses must balance the true cost of providing high-quality care with what parents can afford. Because of this, many child care businesses operate on narrow margins and often cannot pay employees an adequate wage. Employee wages and benefits make up more than half the cost for most child care businesses (68 percent for infants and 59 percent for toddlers and preschool-age), with other expenses going toward rent and utilities, administrative costs, and classroom materials.⁴⁷

Low wages for child care workers leads to staffing instability, making it challenging for child care businesses to retain workers and remain open.⁴⁸ In Montana, 4,380 individuals work in the early childhood field, about the same number that work as high school teachers.^49,50 Child care workers are predominately female (84 percent) and more diverse compared to all workers (15 percent of child care workers are workers of color compared to 11 percent of all workers).⁵¹ In Montana, the median wage for child care workers was $10.99 an hour in 2020, which means making $22,900 per year if working full-time.⁵² This is barely hovering above the poverty level for a family of three. Child care workers make less than half the wage of a kindergarten teacher, even though 24 percent of child care workers in Montana have a bachelor’s degree or higher.^53,54

The child care system in Montana is in dire need of solutions that consider the cost of care for parents while providing adequate funding for child care businesses that continue to play a critical role in Montana’s economic recovery.

Recommendations

Montana lacks strong state investments in the child care and early childhood education system. Federal funding contributes 24 percent of the estimated cost to provide care to children younger than 6 with all parents working (not including one-time relief money related to the pandemic recovery).⁵⁵ Parent payments or other private funds make up 74 percent.⁵⁶ State investments of $9 million per year make up only 2 percent of the total estimated cost to provide care.⁵⁷ These percentages will shift in the next few years with the influx of federal relief funding for child care and early childhood education. A more stable and equitable early childhood education system is in reach for Montana. However, state policymakers should prioritize investments in quality early childhood education to make that a reality.

Montana needs innovative and long-term solutions to build a better child care system that works for children, parents, and businesses. As Montana begins infusing the millions of dollars in federal relief into the child care system, policymakers should reimagine what child care can and should be in our state and invest in infrastructure and programs that set Montana up for long-term success. Specific recommendations include:

Access

• Over the next three years, prioritize stabilization grants to areas with the most significant child care shortage:
  • Providers in rural areas and high poverty areas where child care access is limited.
  • Providers that serve historically marginalized communities, including children of color and children with special needs.
  • Providers that offer infant and toddler capacity or non-traditional hours of service.
• Provide capacity grants and expand the Provider Financial Assistance Program to support new providers with start-up costs. Providers describe staff recruitment, training, and the licensing process as barriers to becoming a fully licensed facility.^58,59 Capacity grants paired with outreach to current Family-Friend-Neighbor providers could reach an audience to recruit new family home providers.⁶⁰
• Contribute additional funds to expand Head Start slots and Early Head Start-Child Care Partnerships, particularly in tribal communities operating tribal Head Start programs. Head Start is an evidence-based program and is particularly essential for providing high-quality care in tribal communities. Prioritizing the expansion of Early Head Start (age 0 to 2) can address the immense need for more infant and toddler slots.⁶¹ Investing additional funds in Head Start is a ready-built solution to reach more children in Montana. Other states have implemented this funding solution with success.⁶²

Quality

• Provide additional support to expand the Infant and Early Childhood Mental Health Consultation capacity across the state. Equipping providers with the mental health training and resources they need will help support child care workers, families, and children. Mental health consultation increases retention and job satisfaction for child care providers, an additional long-term benefit.⁶³
• Remove barriers for participating in the quality rating and improvement system (QRIS). Businesses have noted that training and administrative requirements at the beginning of the QRIS process are barriers for participation.⁶⁴ Participating in QRIS may also be out of reach for facilities with fewer resources. This potentially widens inequities across the state where only the most well-funded programs participate in QRIS and are rewarded with additional incentives.⁶⁵ Allowing flexibility on the timeline to meet training requirements and offering incentives earlier in the quality rating process may attract additional providers to participate.
• Better align licensing and quality rating and improvement system (QRIS) requirements with Head Start. Head Start providers struggle to participate in state licensing and QRIS due to a lack of alignment between federal and state requirements.⁶⁶ Accepting Head Start training and monitoring to meet quality requirements will streamline Head Start participation in QRIS.

Affordability

• Over the next three years, prioritize stabilization grants for providers to increase child care worker pay. Child care workers are essential and deserve adequate wages. Montana needs a stable child care workforce for parents to return to work.
• Reach more families that can benefit from child care scholarships by increasing income eligibility to 200 percent of the federal poverty level. Families just above the current eligibility cutoff can spend more than a quarter of their income on child care.^67,68 Expanding eligibility will reach up to 2,700 more children.⁶⁹
• Expand a shared services model statewide to make it easier for businesses to coordinate common services such as accounting, insurance, benefits for employees, and a substitute pool. Shared services models help small child care businesses tap into pooled resources at a lower cost than obtaining them on their own.^70,71
• Increase pay for child care workers and ensure professional development opportunities are within reach. Provide additional funding for current scholarship and apprenticeship programs that support training and higher education for child care workers. Provide all child care workers with a stipend that increases with progressive experience and education, like the Reward Program in Wisconsin.

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Footnotes