Alaska child care advocates hope new law and $7.5 million in grants will help the embattled sector

Child care advocates in Alaska hope a new state law and $7.5 million in grants will help stabilize an industry in crisis.

Senate Bill 189 was passed broadly by the Legislature on the last day of the legislative session in May. The measure expands the income threshold for families who can receive child care benefits and allows businesses to claim tax credits for investments in child care.

Providers and childcare workers have long struggled with low wages, high staff turnover and poor secondary employment conditions. Parents complain about long waiting lists and sky-high costs at childcare centres.

Julie Coulombe, Republican Rep. from Anchorage and the bill’s lead sponsor, said in an interview Thursday that she was excited to see SB 189 become law.

“I’m really happy that this is going to make a difference,” she said.

Alaska’s child care sector has received unprecedented attention recently. Governor Mike Dunleavy created a Child Care Task Force last year through an administrative order to improve the affordability, availability, and quality of child care in Alaska.

SB 189, which reflects the task force’s work, quietly became law Monday without the governor’s signature. The governor’s office did not respond to a request for comment on why Dunleavy did not sign the bill.

Dunleavy spokesman Jeff Turner said Coulombe had worked closely with the governor’s office on child care policy. Dunleavy appreciated Coulombe’s work on the task force and was pleased that the Legislature passed the child care provisions, Turner said.

Tax credits

The authors of SB 189 wanted to encourage the private sector to invest in child care through tax credits. Public companies, such as ConocoPhillips and Costco, can now claim up to $3 million in tax credits to build a child care center or subsidize child care for their employees.

Blue Shibler, executive director of the Southeast Alaska Association for the Education of Young Children, is working to build a new daycare center in Juneau with space for about 100 children. Shibler said she is “really focused” on securing business investment.

“It’s a big step forward,” she said of the measure overall. “It shows a commitment from our state to supporting children.”

Advocates say the COVID-19 pandemic has stretched Alaska’s child care system to breaking point and exposed the sector’s weaknesses. Since then, Republicans nationwide have shown greater interest in investing in child care as a labor market solution.

Kati Capozzi, president and CEO of the Alaska Chamber of Commerce, said member businesses have repeatedly complained in recent years about the affordability and accessibility of child care.

“(It) has created a huge problem in the workforce,” she said.

Consulting firm Stellar Group wrote a report in December that found 19% of child care centers in Alaska have closed since 2019. In Anchorage, the number of child care workers declined by 45% between 2018 and 2022, the report said.

Another 2021 report estimated that Alaska loses $165 million in economic activity annually due to a child care shortage.

The Alaska Chamber of Commerce advocated for the child care provisions to be included in the bill. Capozzi said it was a somewhat “surprising development” for a chamber of commerce, but she said improving child care “is a very straightforward business issue, as far as we’re concerned.”

Coulombe and Capozzi said several Alaska businesses have expressed interest in child care tax breaks, but it’s unclear how many businesses will participate in the program, according to the Alaska Department of Revenue.

“Even if one company took advantage of the child care tax credits, it would impact every community,” Capozzi said.

SB 189 also expanded the income threshold for families eligible to receive subsidies for child care costs, which can be higher than the annual tuition at the University of Alaska.

The Alaska Department of Health estimates that an additional 18,000 Alaska children under 12 will meet the new criteria for financial assistance. The state expected that an additional $5.6 million per year would be needed for the newly eligible children.

Rep. Zack Fields, D-Anchorage, said the tax credit portion of the bill is the “most interesting,” but he said the expanded aid for families would have an impact.

“More working-class families will be able to afford childcare,” he said. “That’s obviously a very positive thing.”

$7.5 million grant

Low wages have long been a major source of frustration in the child care industry. Stellar Group’s December report found that the median wage for a child care worker in Alaska in 2022 was $15.14 per hour. Alaska providers reported an average annual employee turnover rate of between 42% and 55%.

Last year, the Legislature appropriated $7.5 million as part of the budget for child care subsidies. Just under 1,600 workers received a pay raise of $4,860 per recipient, according to the Alaska Department of Health.

Lawmakers have approved the same $7.5 million again this year. A legislative fix means this year’s funding can now be paid directly to child care providers as grants.

Leah Van Kirk, health care policy adviser in the Office of the Commissioner of the Department of Health, said the grants would be distributed starting in January.

“We will adjust the criteria accordingly, but we don’t want to be too restrictive,” she said.

Heather DeLoach, corporate finance manager at Bright Beginnings Early Learning Center in Anchorage, said employee wages have increased 50% over the past four years.

“We need those funds and we’re super, super grateful that the Legislature has recognized that need, and the governor has recognized that need,” she said.

A child care wage subsidy program has been in place in Juneau for several years, with advocates saying it has helped stabilize and even expand child care in Alaska’s capital.

Shibler said a few Juneau providers recently reported no staff turnover in more than a year. “That was unheard of,” she said.

Robert Barr, Juneau’s deputy city manager and a member of the governor’s child care task force, said the state’s $7.5 million in subsidies were “meaningful.” He called for the task force to recommend that the state supplement workers’ wages.

Providers operate on razor-thin margins and are almost entirely dependent on tuition. Wages are rising, and so are tuition fees, further burdening families.

“The business model doesn’t work, right? The math just doesn’t add up,” Barr said.

Barr said he hoped the Legislature would consistently fund $7.5 million in child care subsidies annually, following the lead of other advocates. He said the “one-time nature of it” as part of the budget “makes it hard for people to plan.”

Coulombe, however, was skeptical. A former child care worker, Coulombe argued that relying on government subsidies for wages “is a dangerous game.” She suggested that tax credits and extended family assistance were better ways to stabilize the sector.

This week, Dunleavy’s Child Care Task Force will release a study on child care costs. The study will help officials figure out how much child care really costs families and determine subsidy rates.

Supporters were generally enthusiastic that SB 189 passed. But several said they expect the cost of care study will show that the $7.5 million in grants is a good start, but not nearly enough.

“I think the scale of the problem is so great that no one level of government can fully solve the problem on its own,” Barr said.

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