Deaton plan cuts $51 million out of child care subsidies

By Annelise Hanshaw and Steph Quinn

Missouri Independent

Every child who starts at Lemay Child and Family Center in St. Louis County receives a developmental screening during their first month of attendance.

Based on these screenings, kids can receive speech or occupational therapy at the center, and staff can connect families with community support like help sourcing healthy food.

“The economy right now is just really challenging,” said Denise Wiese, the center’s executive director. “So we feel that those extra supports we give parents and children are really critical.”

More than 60% of the children the center serves qualify for a state subsidy program that helps cover the cost of day care for low-income and foster children.

But if lawmakers approve a proposed $51.5 million cut to that program, Wiese told The Independent, the center could be forced to roll back services or reduce scholarships that make child care more affordable.

The cuts are part of a budget plan laid out by Republican state Rep. Dirk Deaton of Seneca, chairman of the House Budget Committee, that would eliminate incentives the state currently pays on top of the basic child care subsidy rate.

Deaton told the committee the enhancements were created before the state started paying market-rate costs for child care.

“When those were put in place, the rates weren’t, in some cases,100% of market rate,” he said. “In a lot of cases, we’re already paying the market rate. So why would we be paying more than the market rate?”

“Some people think, ‘Okay, that funding just gets cut, and so they still get paid the market rate. They don’t get this extra bit,’” Hanson said. “But it’s not an extra bit to be able to provide that additional therapy or additional support.”

With the cut to their bottom line, child care providers may have to turn families away.

“What decisions do they have to make?” Hanson asked. “Do they have to lay off staff? Do they have to close?… Do they just quit taking foster families?”

Some facilities already hesitate to take on those families, Hanson said, and the proposed cuts would “de-incentivize that even more.”

The cuts come during a period of instability for the program. At the end of 2023, the state changed software providers to manage the subsidy payments, and technical difficulties led to a backlog of missed payments that dragged on for months.

Some day care providers closed under the pressure, and the stress continues today.

Demand for child care subsidies has risen 19% in the past year, exceeding the amount of money appropriated to the program this fiscal year.

With available funds shrinking, the state’s education department launched a waitlist for the program at the beginning of March. Children under state care, like foster children, are exempted from the waitlist. Those who qualify based on their income, though, will have to wait until funds are available.

“Our system is already at or over capacity,” Hanson said. “We don’t have enough resources to serve the children and families that are qualified with this current [funding] structure.”

Despite mounting pressure, providers are expected to see a long-awaited change in the way subsidies are paid that state officials promise will be initiated by this summer.

Currently, child care providers submit attendance logs and are reimbursed based on the number of days subsidy children are in their care. In May, the department plans to pay subsidies at the beginning of the month based on enrollment, not attendance.

Gov. Mike Kehoe championed the switch in his inaugural State of the State address last year.

“We will not allow late payments, or technology issues to put these small businesses at risk of not being able to provide for families in need of child care,” he said.

The governor is still supportive of paying providers based on enrollment, but Deaton’s proposed budget could prevent this change.

Deaton’s budget plan includes instructions to pay “solely on a child’s actual attendance and shall not be made prospectively, on authorization, enrollment, contracted slots or any other non-attendance-based methodology.”

State Budget Director Dan Haug told the House Budget Committee Monday that the state would hold off on paying by enrollment in May if Deaton’s suggestion is signed into law for next fiscal year, which begins in July.

“I don’t think it would make sense to make a change in May and then go back on July 1,” he said. “That would not be good for the providers, moving them around with how they’re being paid.”

Paying on enrollment gives flexibility to providers, Wiese said. A family may need to miss 10 days in a month, but the center can only get paid for five absences.

“If a family wants to spend their day with their child, that’s the best thing for the child,” she said. “If [the state is] paying us based on authorization, that slot is paid for whether that child is here or not.”

With budget amendments forthcoming, Hanson hopes to see edits to benefit child care providers.

“We know that (lawmakers) care about children and families,” she said. “But sometimes these decisions don’t reflect that these [cuts] are going to be really painful for children and families in our state.”

The Independent’s Rudi Keller contributed to this report.