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Federal and state changes to publicly funded child care have left local providers frustrated
By: Amanda Pirani
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ATHENS, Ohio (WOUB/Report for America) — Child care providers in the region say they’re experiencing strains after the state’s publicly funded child care system saw changes to its reimbursement model.
The state budget, which took effect Nov. 1, adjusted the number of hours a child must spend in child care to be considered full time or part time.
That matters for child care providers receiving publicly funded child care (PFCC) reimbursements, who receive a different rate depending on whether a child is considered full time, part time or hourly.
Some child care providers say keeping students who were previously considered full time has left them with financial challenges.
“Budget-wise we’re taking a hit … because we feel we have a connection to those families and we don’t want to lose them,” said Heather Thompson, owner of Stages Early Learning Center in Athens.
The change comes as another anticipated Biden-era federal policy was rescinded Monday, which would have required enrollment-based reimbursements for public child care.
Child care providers like Thompson believe the change would have provided some financial relief. They would have received payment even on days when enrolled children were absent because of sickness or another reason.
She said margins for child care centers are already extremely challenging — one of many reasons the region sees a shortage in child care options.
Child care providers say they’re frustrated by change to PFCC reimbursements
Ali Smith is an operations manager with Policy Matters Ohio, a nonprofit think tank that advocates for the child care industry.
She said the change in part-time and full-time care categories was a last-minute change in the state budget, with little input from providers.
Previously, 7-25 hours of child care was considered part time and over 25 hours was full time. Now, the part-time category will be defined as 10-33 hours of child care per week. Care for less than 10 hours a week is reimbursed at an hourly rate.
“You’re serving the same group of kids and their parents so their parents can go to work or school, and suddenly the reimbursement rate … you’re getting for taking care of those kids, goes down substantially,” Smith said.
Lacey Martin is the owner of Timber Tops Dayhome in The Plains. She believes the change to the threshold for full-time versus part-time hours will discourage centers from enrolling PFCC children.
“It’s going to come down to more and more centers turning away (those) families,” Martin said. “Because the money just isn’t there to support them and keep your center running.”
Thompson said that, when possible, she’s worked with families to rework their child care schedule so that it falls within the new full-time standard.
While she doesn’t typically take children on a part-time schedule, she’s had to make adjustments in light of the policy change.
“We don’t take part-time enrollment for children, but we’ve had to make accommodations to do that so we’re not losing even more of our families,” she said.
In a statement regarding the changes, DCY emphasized that a family’s eligibility for PFCC would not be affected by the change in thresholds, only the payment category for providers.
Lynanne Gutierrez, CEO and president of Groundwork Ohio, said that while providers have been naturally alarmed by the change, it’s hard to say for certain what its impact will be until the Department of Children and Youth (DCY) has more information on PFCC enrollment.
She said the effects of the change are also complicated by a rate increase some providers saw in October as reimbursements were raised to meet the 2024 market rate survey.
The survey is performed by DCY every two years to help inform PFCC reimbursement rates throughout the state. A federal rule requires the state reimburse providers at the 50th percentile of the survey.
But that adjustment to 2024 rates won’t benefit many home-based providers.
That’s because the budget also aligned reimbursement rates between the two forms of home-based child care, type A and B providers.
Type A providers can care for more children but also have greater requirements regarding staffing and licensing. They will now be reimbursed at the same rate as Type B providers, which will mean an overall drop in payment per child.
The change is especially relevant in rural areas, where home-based child care is more common due to population size.
“Now they’re not going to really have an incentive to get the extra certifications and qualifications needed to be able to have a staff person to expand hours or the number of kids they can care for, because they’re not going to make any more money,” Smith said.
After the Minnesota scandal, providers will not see an anticipated reimbursement change
Child care providers now face another challenge as a much-anticipated change to PFCC reimbursements, previously delayed awaiting federal guidance, is rolled back.
The Biden administration introduced new federal requirements for publicly funded child care in 2023, which included reimbursing providers based on enrollment as opposed to attendance.
For providers, enrollment-based reimbursements are viewed as more consistent income, and is typically the payment model for families who are not using PFCC.
“They pay for that spot at our facility, knowing that … none of our expenses change, our rent, our utilities do not change for (absences),” Thompson said.
Gutierrez said the state does allow for providers to use some absentee days under the current system, but the benefit of those days depends on the number of PFCC children at a center.
“They do have some flexibility in order to make those hours count without the child being present,” she said. “This is definitely, like, provider by provider, a different experience of the issue based on how many publicly funded kids they have.”
House Bill 184, passed at the end of November, delayed the implementation of enrollment-based reimbursement until 2028.
Gutierrez said the state applied for a waiver in August to delay spending on the implementation of changes awaiting federal guidance.
Now, publicly funded child care has come under greater scrutiny after a viral video accused child care centers in Minnesota of fraud.
The U.S. Department of Health and Human Services announced Monday it will rescind the Biden-era requirement to reimburse based on enrollment — a move that never went into effect in Ohio.
A press release announcing the change said states may now continue payments based on “verified attendance,” one of several provisions in the Biden-era rule change rolled back.
“Paying providers upfront based on paper enrollment instead of actual attendance invites abuse,” said HHS Deputy Secretary Jim O’Neill in a press release.
As a result of the allegations made in Minnesota, the federal government has also frozen all federal funds for publicly funded child care. Ohio officials said the PFCC program would be able to continue operating for 8-10 weeks before feeling the loss of federal funding.
Among industry challenges, advocates warn Ohio’s PFCC system faces an existential threat
Thompson said the policy changes this winter have been stressful to navigate. Her center has already moved to increase its tuition for new families.
“We’re going to have to try and be creative and look at programming,” Thompson said. “We’re already operating at our minimum budget for operation costs, so there’s not a lot that we can cut.”
According to Guiterrez, many of the policy changes frustrating child care providers come down to a lack of funding for the PFCC system.
“It’s back to this, this reality that in the resource-starved system with a huge gap, and the lack of political will to put state funds … into the system, they’re trying to just save on the spending of federal funds so they can use those federal funds in the out years to fill the gap that they don’t want to fill,” she said.
That gap is a $300 million annual shortfall the state legislature will face in 2028, when one-time Temporary Assistance for Needy Families (TANF) funds used for child care will be spent up.
“So in fiscal year 2028, whoever the next governor is, is going to come in and introduce their executive budget, and at that time, there will be a $600 million biennial gap to maintain just the status quo of publicly funded child care,” Gutierrez said.
Amanda Pirani is WOUB’s Report for America Journalist covering Economic Livelihood. For more information about Report for America, you can click here.