(gentle music) - Come on.

One, two, three.

Whoa.

Very careful.

- [Kerri] If you were to describe a rock and hard place, childcare is there.

- [Mortenson] We found out what doesn't work, we're still looking for what does.

- [Bokorny] The answer can't be at the end of this legislative session, We don't have the money or there's nothing, we can't not do anything.

That's not gonna work.

- [Reed] The question is, what's the role of government when it comes to childcare?

- [Jackie] Childcare centers continue to close around the state, and lawmakers debate what, if anything, they can do about it.

That's tonight's South Dakota Focus.

(children signing) (gentle music) - [Announcer] This is a production of South Dakota Public Broadcasting.

(gentle music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (gentle music) - [Jackie] January means a new year and a new legislative session, when lawmakers and lobbyists and reporters make their way to Pierre.

And it's a halfway mark in our season devoted to South Dakota children.

So far this season, we've learned that the earliest years of a child's life make a big difference for their brain development and their emotional development.

And we've also learned that even though some communities are trying some fresh approaches, the childcare crisis isn't getting better.

And there are some longstanding centers that are also at risk of closing.

So that's why some people are looking to lawmakers in Pierre for some solutions.

According to the Annie E. Casey Foundation, 75% of South Dakota families with kids under six have all parents working outside the home.

That means most families need some kind of childcare option, but childcare providers around the state are facing their own challenges.

Nicole Weiss is the Early Learning Director for the YMCA of Rapid City.

She participated in an SDPB townhall discussion on childcare in October.

- As we sit here, you know, I said that we have three classrooms closed, I know another very large center in town has four classrooms closed.

And it was released last week that another center in town is closing.

- [Jackie] Weiss says those classrooms are empty because they can't find enough childcare workers.

When we talked again in late November, she said things had only gotten worse.

- Two large centers in Rapid City have closed within the last few months.

We have four classrooms closed ourselves, and I mean, we take pride in trying to be one of the higher paying places and higher quality, and so hoping that that will draw staff in.

But there is not, there are not enough workers in Rapid City in childcare, in preschool.

Until we figure out how to pay them and how to recruit them and how to prevent the burnout, we're just kind of in a very vicious cycle.

- [Jackie] When it comes to training the next generation of early childhood educators, that cycle is getting harder to ignore.

Jen Johnson is with the Fishback Early Childhood Education Center in Brookings at South Dakota State University.

She says she's honest with her students.

- We have to advocate for early childhood.

We have to fight for it.

And we have to make clear that what we're doing sets the stage for future learning for these individuals for their whole life.

- [Jackie] And some of that advocacy is at the state level.

Laura Gloege is co-coordinator of the Fishback Center with Johnson.

She says learning how to support the concept of early childhood education is part of their program.

- So some of our college students we've had do different assignments of, if you were gonna talk to some of our legislators and there's only a set amount of funding, how would you advocate for early childhood education?

So that they start thinking about those types of situations.

You know, as they're coming in, they're just wanting to learn how to work with children in the classroom.

But we're also pointing out that there's more to it than that.

- I also talk about, you may make more money in other positions, but if you're not happy doing what you're doing, it ultimately will not be worth it.

(chuckling) It will maybe for a little bit, but I think we also have to acknowledge that, you know, follow your passion, follow your love, and then do something about it when you're in theirs.

- [Jackie] The Fishback Center offers the state's only bachelor's degree in early childhood education.

But few childcare centers in South Dakota require that level of training, even as the calls for improved early education programs are growing.

In fact, just last year, the Department of Social Services removed some of the training requirements for childcare providers and updated the staff to child ratios.

The goal was to remove regulatory burdens on childcare providers and allow them to take on more kids.

But some say the move was a step backwards, even if it helped bring more attention to the ongoing childcare crisis.

- I feel like we've been on a bullet train a little bit over the last few years.

But then at other times, I feel like we've been on a steam engine.

- [Jackie] Janessa Bixel is the Executive Director of the South Dakota Association for the Education of Young Children, a professional development organization for early childhood educators.

She says the turnover rate for early childhood professionals is unsustainable.

- I just hear from directors, they get 'em in, they get 'em trained, meeting the requirements from the state, and then they don't, they just don't show up.

They go to lunch, they don't show up.

They don't come in the next day.

It's a stressful job.

And if you don't understand how to work with young children, foundational child development, it can be very taxing.

And that's where our professional development opportunities hopefully will help start making an impact.

- [Jackie] Limited training can add to the stress of the job, but another factor has proven to be a bigger obstacle for Nicole Weiss, salaries are not competitive.

- [Nicole] The childcare field and preschool field pay less than anyone, basically.

They pay less than grocery stores.

They pay less than restaurants.

They pay less than schools.

They, I mean, literally, they pay less than everybody.

- [Jackie] It's a national problem.

In 2021, US Treasury Secretary Janet Yellen said childcare workers make on average $27,000 a year.

That's in the bottom 2% of occupations.

Low wages can lead to high turnover.

A 2022 report from South Dakota's Department of Social Services put the turnover rate of direct care staff at 88%.

Another participant in SDPB's childcare townhall was Kayla Klein.

She's the director of Early Learner South Dakota, the advocacy arm of the South Dakota Association for the Education of Young Children.

Klein also has experience running a childcare facility, and she explains it's not as easy as just raising prices to give staff more competitive wages.

- As soon as you start to have the market continue to increase the fees, you're really just going to be providing care for those who can afford it.

You're forgetting about your frontline workers who are, you know, you rely on as your barista in the morning to serve you your coffee, and who are working at McDonald's and helping you bag groceries at Walmart.

You know, it's those individuals who are priced out.

So are we okay with that?

- [Jackie] It's a catch 22 for providers like Nicole Weiss.

- For us to even pay our staff the tiny wage that they get, we have to charge parents a very high amount.

And then that doesn't even cover.

And if we raise that to raise wages, parents just can't pay.

- [Jackie] In November, she was short 13 full-time staffers.

- We pay retirement fully at 12%.

We pay, we offer medical, dental, vision.

We have amazing PTO.

We have access to the Y.

We have discounted childcare.

We have staff rooms with massage chairs.

Like, we are doing what we can, and we cannot get people.

And it's a hard fight to keep fighting.

- Low wages create trouble recruiting staff.

When a childcare center is understaffed, it can't take on as many kids as it might be licensed for.

That means the center isn't taking in enough money, And for an already struggling business model, that can make a difference between whether a center stays open or not.

Let's take Sioux Falls as an example.

So Sioux Falls is the most densely populated and fastest growing part of the state.

It has center-based childcare options and in-home options, both regulated and unregulated.

But even in spite of that growth, Sioux Falls is seeing the same challenges in childcare that other communities are seeing.

So that's why the Sioux Falls Childcare Collaborative released a report last summer.

It includes research specific to the community.

For example, 3/4 of childcare centers in Sioux Falls are actively trying to hire more workers, and 64% of centers can't even operate at their full capacity because of staffing shortages.

The 90-plus page report includes dozens of recommendations for action from state and local government and the business community.

Examples include creating an Office of Child and Youth Development within city government to act as a coordinator.

That's something the city council voted down in September.

The report estimates the area needs licensed childcare for another 600 children to come close to meeting demand, but instead of adding to its childcare capacity, the city's losing it.

When word spread in December that the longstanding Apple Tree childcare facilities planned to close all but one location, hundreds of families found themselves desperate for a last minute placement.

The ultimate fate of those centers is still unclear, but the impact remains.

Kerri Tietgen, the CEO of EmBe, another large childcare provider in Sioux Falls, says this problem isn't new.

- We receive at least on a monthly basis, if not more, panic calls on a regular basis of centers closing, staff looking for jobs and families looking for a new space.

So, with the most recent in the last month, now there's a potential of a thousand less spots between the closures, or potential closures, in the community.

A thousand less spots for children in Sioux Falls specifically.

Now, there is not enough openings, and there's not enough open capacity in the centers currently to serve those families.

So our community is about to be in a really significant crisis.

- [Jackie] Without reliable childcare, parents are forced to make really difficult decisions, like stepping away from the workforce altogether.

I posed that idea to some members of the SDPB townhall in October.

What I hear is, if moms would just stay home, that would solve the problem.

Michelle Erpenbach with Sioux Falls Thrive, a member of the Childcare Collaborative, has heard something similar, and she says, it's not that simple.

- The comment was, well, you know, when our kids were little we left them at the babysitter too.

We, I know what daycare's, what this crisis is about.

No, if you left your children at a babysitter, you don't understand the level of the issue that we're talking about.

- The head of the South Dakota Chamber of Commerce, David Owen, agrees.

He says expecting all mothers to stay home isn't realistic.

A point Democratic State Representative Linda Duba made earlier in the conversation.

- I've been working with my board of directors over the last two years to get there.

And the answer is, in this economy, as the representative said, you can't take 30% of the population and tell them you must stay home.

- [Jackie] Owen says, this is especially true in light of inflation's role in rising costs.

But childcare is a uniquely difficult business.

- I started my career in banking, and I tell you, if somebody came to me with this business model of opening a childcare center, as a banker, I would most likely have to say no, the finances don't work out.

Not because I don't love the work, not because it's not important.

The financial model does not work.

- [Jackie] Kerri Tietgen with EmBe says, according to the US Department of Health and Human Services, families should be spending about 7% of their annual household income on childcare.

Instead, she says it's closer to 20% in South Dakota, and that's just for one kid.

- The average household makes about $60,000 a year, and today, childcare costs about $12,000 a year per student.

So significantly higher.

So there's a limit to how much we can raise prices.

The other thing, the other alternative is, when that happens, as an employer, you get as efficient as you possible.

So you lower expenses or you become more efficient.

Well, 80% of childcare expenses are wages.

- [Jackie] The nature of childcare, and even the state's limited regulations, mean a childcare business can only pare down so much.

- So in regards to efficiencies, what's unique about childcare is we have ratios that are put in place for safety.

Safety for the students and safety for our our teachers.

So, in a zero to two classroom, ages zero to two, the ratio is one to five.

So I can have one teacher to serve five students.

So at $12,000 a year, that's about three to four dollars of revenue per hour.

So think about this.

So you've got five students, so you've got about $15 to $20 of revenue per hour to support the staff wages, benefits, supplies, facilities, insurance, all of the things.

And so this model doesn't work.

So we have pushed too far on the cost and our expenses have gone up and there is no option in regards to efficiencies.

So it's really, if you were to describe a rock and a hard place, childcare is there.

- [Jackie] Since typical market solutions don't work for childcare, some are looking to policy makers.

For instance, the Sioux Falls Childcare collaboratives report has about a dozen state policy suggestions, from a revamp of the state's childcare assistance program to a property tax abatement for in-home providers.

That could make a difference for business owners like Karen Rieck, who runs Mrs. Karen's House Childcare and Preschool out of her home in Sioux Falls.

She was another panelist for our childcare townhall discussion.

- I live in Lincoln County, but live in the city of Sioux Falls.

My property taxes almost doubled, therefore I didn't have enough money in my escrow account, so now my mortgage has gone up and I have to make that up from somewhere.

- [Jackie] Early Childhood education is her passion.

She describes herself as a brain architect, but Rieck has to work a second job at Avera to make ends meet.

- And it's not just me.

I see that throughout the entire state of South Dakota.

My cousin is a family childcare provider in Presho, South Dakota, and she is having to close her doors because she cannot afford to make ends meet.

And she will be leaving her position as a brain architect to work at the local gas station where she gets paid more.

Which is really sad, because she as well, has a degree in child development.

- [Jackie] Several communities are working on their own solutions, but many people on SDPB's townhall panel see a benefit to statewide policy solutions to address more systemic issues like low wages for providers.

Michael Bockorny chairs the executive board of the South Dakota Economic Development Professionals Association.

He says there's an urgent need for the state to get some skin in the game.

- The answer can't be at the end of this legislative session, we don't have the money, or there's nothing, we can't not do anything.

That's not gonna work.

If you wanna to talk about, you know, a lot of people come back and they say, well, this costs a lot of money.

I think they're looking at it wrong.

It's not a cost, this is an investment.

- [Jackie] But that investment is an ideological roadblock for some state leaders, including South Dakota's own chief executive.

Governor Kristi Noem responded to a question about potential childcare solutions in a December interview with KWAT in Watertown.

- [Kristi] The one thing that that people have asked for that I'm not willing to do, is directly subsidize childcare for families.

I just don't think it's the government's job to pay or to raise people's children for them.

I, you know, there's been an ask, typically from Democrat members of the legislature, that say if parents go to work, the government should pay to watch their kids.

But I still believe parents are parents, and their responsibility is their children, and we'll do all we can to make sure that there's resources in their communities for them to utilize.

But I don't believe that it's the role of the government to assume all financial responsibility for raising these children.

- [Jackie] Full government funding of childcare has not been proposed through the legislative process in recent years.

But the Noem administration has distributed $40 million in mostly federal money to childcare providers around the state, including facilities like Apple Tree in Sioux Falls.

Yet those one-time funds have proven to be a bandaid on a deeper problem.

While other legislative leaders recognize the workforce impacts of the childcare crisis, they shared the governor's hesitance to just pump more money into the issue.

Here's House Majority leader Will Mortenson after the Governor's State of the State address earlier this month.

- We've seen other states that have just created subsidies and given a lot, a lot of ongoing money.

Those states have largely failed.

I mean you go Google California childcare crisis, there's a news story out from this week, and that's despite them putting in a lot of these subsidies.

We're really looking for an alternate path to move the needle on making sure that there's safe and affordable childcare for everybody.

We found out what doesn't work.

We're still looking for what does.

- [Jackie] Fellow Republican Tim Reed, a state senator from Brookings, is looking for solutions.

He's leading an informal task force on childcare, which includes members like Kerri Tietgen of EmBe, Janessa Bixel of South Dakota Association for the Education of Young Children, and other providers and experts.

Reed has been following the issue as the former mayor of Brookings and current CEO of the Brookings Economic Development Corporation.

- Childcare's has been a long-term issue in Brookings, and we're mostly, you know, talking about the zero to three seems to be our major problem.

We're working with the school system and we're working with the Boys and Girls Club to make sure that we get everything covered, but from zero to five basically.

And so that's really what we're talking about in Brookings.

I think there's a wider state issue that really has to do with a lot of centers that are closing.

We're not having that issue in Brookings, but I think that's kind of heightened what's happening with childcare.

Just the kinda scared, all of a sudden you get kinda the rug pulled out from under you and have to figure out what you're gonna do for childcare.

I mean I think the biggest thing we have to look at is that we're figuring, through estimates and reports that have been done, $329 million in lost productivity with childcare.

And I'm sure you're gonna see that even more with these childcare centers closing.

- [Jackie] That $329 million loss comes from a report by ReadyNation on the economic impact of the childcare crisis in South Dakota.

While center closures aren't an issue in his community, Reed has kept an eye on what's happening in Sioux Falls and other areas.

- So at the same time where we're saying we've got this loss that's happening in productivity, we can't build capacity 'cause actually we're even going backwards.

So I think what the issue comes down to is we have to figure out what it really costs.

What does it cost to provide childcare?

And that's the number one thing that we need to do.

- [Jackie] That's why he's pushing for a one-time investment of state money into a statewide cost analysis study of childcare.

It's not a direct investment into the problem that some advocates might want, but Reed recognizes the ideological issues at play in discussions of childcare policy.

- The question is, what's the role of government when it comes to childcare?

And I do believe that we are there to at least put out this is what it costs.

And then we have subsidy rates.

We do subsidize to 207% of the federal poverty level.

We subsidize childcare.

And if we're not paying enough at the subsidy rate and these centers are closing, we have to figure that out as government.

Then I think what we need to do, and this is gonna take a partnership, and that's what we have a task force that we're putting together here over the next year, is how can everybody participate to solve this issue.

- [Jackie] The task force will likely discuss potential business solutions that have already been highlighted by groups like the Sioux Falls Childcare Collaborative and Early Learner South Dakota.

Brooking Senator Tim Reed sees space for private businesses and foundations to step up, much like they already have in Rapid City.

- I think by the end of next year we should have some other legislation, being Rapid City right now ts trying to run a tri-care model, where it's partially government, partially business, and then of course, the parents.

And so I think we'll probably be heading towards that.

So it's kind of nice Rapid City experimenting with it right now, because I think that information will help our choice over the next year, or help us do our research over the next year.

- [Jackie] Senator Reed expects a bill authorizing a childcare cost study to drop early in the legislative session.

From there, it's up to lawmakers to determine whether the proposal will even make it to the governor's desk.

As for Rapid City's tri-share experiment, the John T. Vucurevich Foundation is stepping in where the government has in other states.

Callie Tysdal is the foundation's communications director.

She explained the tri-share model to us last month.

- It's been tested in Michigan and North Carolina, where the employer, the employee, and a third entity actually each pay a third of the childcare costs.

You know, this is really great benefits for everybody involved.

You know, first and foremost, we're not seeing the parents having to shoulder the incredible burden of an eight or nine or thousand dollar childcare cost.

Businesses are able to invest and retain their employees, and then this third entity is able to show that this is a community investment that we all need to really wrap around to make it work.

- [Jackie] The pilot program is set to launch in a few weeks, but the details of the business partner for the program are still being finalized.

I caught up with Tysdal again at the Capitol just before she presented the Vucurevich Foundation's childcare report to lawmakers.

She explains the challenge of downsizing the tri-share model from a state government level impact to something much more localized.

- We wanted to find businesses that really fit within our focus area, which is mostly low and middle income families in Rapid City.

So, unfortunately we only have room for 30 childcare slots.

So we have to find businesses that have people that fall within our income threshold, which is 210 to 325% of poverty for household income, and also don't have too many employees that they max out our ability to serve them.

I think success looks like, first and foremost, families being able to afford childcare, and that they're able to safely and stably put their children in care.

I think for businesses, it looks like retaining these staff right now.

I think maybe in the future it could be used as a recruitment method as well.

- [Jackie] And like Senator Reed, Tysdal expects the pilot program to inspire creative problem solving beyond the Vucurevich Foundation's reach.

- The privileged part of being in philanthropy is we're able to take risks that oftentimes state government can't.

And so I'm hoping that by some of the work that we're doing in sharing that there can be a little bit more hope about some of these more innovative approaches to childcare.

- [Jackie] Based on early remarks from lawmakers, a direct investment in childcare is unlikely this session.

But Senator Reed thinks a statewide childcare cost study is a meaningful step to determine how to make childcare more sustainable.

- We could pour money into it like has happened over the past two years, but obviously that didn't solve the problem.

It actually made more of a cliff where all of a sudden they're just closing.

We have to be wise with the funds that the state's using.

We can't completely subsidize it.

That's not a place for government.

But there are different places where we can help.

- [Jackie] In the meantime, it's hard for families and providers not to feel frustrated with the state's pace.

EmBe in Sioux Falls accepts donations to its scholarship fund to provide childcare for families who otherwise couldn't afford it.

CEO Kerri Tietgen says the idea that state dollars wouldn't make a meaningful difference rings hollow when she's face to face with families who need a safe place for their kids.

- We've had some incredible situations of individuals that have come to us with significant need and are denied by childcare assistance.

We're not quite sure why, but there's some significant things there.

When you face a family that they're two individuals that are making $16 an hour and they want to go to work and they're proud of the work that they're doing and they don't have family resources, they don't have other things here, and they make too much money for childcare assistance to support their ability to go to work, I think that's worth it.

And I think every dollar to support them being able to do that is worth it.

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