Missouri Child Care Providers Face Closure Due to Payment Backlog

In this spring, the state of Missouri was in arrears of $5,000 owed to Kimberly Luong Nichols for the past due payments for children at her Kansas City daycare enrolled in a state subsidy program.

Operating her licensed daycare within her home for four years, Luong Nichols currently caters to 10 children. Last summer, she suspended her salary to finance enhancements to her facility and two new staff hires, anticipating the resumption of her salary this year.

Upon the cessation of the full subsidy owed to her, she had to lay off her staff.

At present, her family of six is solely reliant on her husband’s $53,000 annual income.

The Luong Nichols family has foregone indulgences such as dining out and purchasing upscale shampoo. They have also forgone vacations.

When creditors began calling, Luong Nichols’ husband contemplated securing a second job. On several occasions, she pondered the closure of the daycare altogether. Yet, she refrained from doing so to spare families, many of whom have children with developmental disabilities or are within the foster care system, the burden of seeking new daycare arrangements.

Luong Nichols is among the myriad child care providers in Missouri reliant on a state child care subsidy system to sustain their daycares.

Administered at the state level as part of a federal block grant program, the subsidy aids in covering costs associated with servicing low-income and foster children.

Nonetheless, in the late months of last year, a series of modifications resulted in significant challenges for numerous providers and families. Parents encountered obstacles in enrolling their children, and providers faced financial strain, leading to difficulties in compensating their staff.

The Missouri Department of Elementary and Secondary Education, the overseeing body, primarily attributes the prolonged backlogs to a contracted vendor. The transition to the new Child Care Data System that commenced in December is yet to be fully operational.

“… There have been a number of unforeseen challenges during the transition, which involves loading family and provider data from the existing state systems into the new (Child Care Data System),” stated Mallory McGowin, a department spokesperson, in a statement last Wednesday. “The Office of Childhood is working diligently to address these issues and extends sincere apologies to the affected child care providers and families.”

Nonetheless, similar backlogs plagued the system three years ago, leading parents to grapple with enrollment challenges and providers to implement significant budget cuts.

The recent dilemmas have compelled some daycares to shutter, while others have transitioned from catering to vulnerable children eligible for the state subsidy to admitting only families capable of self-payment.

Many providers, including Luong Nichols, are barely managing to stay afloat in certain weeks.

#### Payment backlogs not new

In Missouri, child care providers can enroll to receive a government stipend for each child on subsidy, in which a portion of the tuition is directly paid by families, and the government covers the remaining amount post-service provision.

The child care subsidy system is a federal initiative managed by states through the Child Care and Development Block Grant. Families apply for direct payment to child care providers, partially covering the care costs.

In Missouri, only families with extremely low income meet the qualifications, alongside foster children and those with special needs. The maximum income threshold for eligibility stands at 150% of the federal poverty line, equating to $46,800 for a family of four.

As of 2022, the average expense for full-time, center-based childcare for an infant in Missouri was $11,059 according to Child Care Aware.

Based on the last available state data from November, there were approximately 21,000 children benefiting from the state subsidy. The administration of this program transitioned from Missouri’s Department of Social Services to the education department in December, with the current count of beneficiaries estimated at approximately 23,000 children, according to McGowin.

Out of Missouri’s 2,800 licensed and license-exempt providers, notably school districts, about 1,800 are contracted to accept children on subsidy, as stated by Pam Thomas, the assistant commissioner for Missouri’s Office of Childhood, during a recent State Board of Education meeting.

“We are grappling with challenges concerning our vendor and meeting the efficiency and effectiveness expectations of the new system,” Thomas conveyed to the board. “Regrettably, the vendor is falling short of delivering the expected outcomes as per our department’s anticipations.”

World Wide Technology, a prominent technology services provider headquartered in St. Louis, was contracted to devise and execute the new system for the subsidy program, as confirmed by McGowin.

While grappling with the vendor’s shortcomings, board members expressed concerns about the way forward, as Thomas assured them of the department’s tireless efforts to press the vendor to rectify system glitches, extending across approximately nine stages from a family’s subsidy application to the provider’s payment.

“We need to exercise caution in introducing further alterations into the system presently,” she emphasized. “We can bend it, but breaking it is not an option at this juncture. I fear we are on the verge of that.”

However, this isn’t the inaugural instance the state’s management of the subsidy program has precipitated widespread turmoil among providers and families.

Amid 2021, the state attributed a backlog of thousands of payments to the COVID-19 pandemic and the rollout of a novel attendance-tracking system dubbed KinderConnect.

In spring 2023, parents reported enduring prolonged waits to secure approval for state aid, affecting their ability to juggle work and child care responsibilities.

State Senator Lauren Arthur, representing Kansas City and a Democrat, became apprised of the current predicament several months back through legislative staff who began fielding concerns from constituents.

“The delay is unacceptable and is likely to have already led to the closure of child care providers across the state,” Arthur remarked. “The state is already struggling to meet the demand for child care services, and there are insufficient available slots for needy children.”

When questioned last month about the exploration of alternative vendors before the current multimillion-dollar contract expires in December, Thomas from the education department replied she was open to the idea.

Yet, McGowin confirmed on Wednesday that there are no present intentions to seek a new vendor. The payment hiccups, of which 60% stem from technical breakdowns according to state statistics, are anticipated to be resolved by the culmination of July.

Contrary to advance payments, Missouri reimburses providers post-service completion. This, coupled with providers receiving compensation based on attendance rather than enrollment of children under the subsidy program, renders budgeting immensely challenging for providers supporting low-income and foster children.

“We are counting on the state and DESE to prioritize streamlining these system challenges to expedite payments to providers,” articulated Casey Hanson, the director of outreach and engagement at Kids Win Missouri, an advocacy organization focused on child welfare.

Having dedicated countless hours with child care providers over several years, Hanson comprehends the high stakes involved.

“They exhibit remarkable resilience,” she underscored. “Their dedication to children and the future of our state is unparalleled.”

#### ‘Our own personal pandemic’

Tina Mosley found herself compelled to discontinue admitting children receiving subsidies, like numerous other providers in the area.

For 28 years, she has headed and managed Our Daycare and Learning Center in St. Louis, licensed to accommodate ten children. The facility is situated within the Normandy school district, characterized by a median household income below $39,000 and more than 56% of students in public schools receiving SNAP benefits, as per 2021 data from the National Center for Education Statistics.

She ascertains that all providers in the vicinity accepting subsidy children, including herself, face the same adversities.

“Every one of my colleagues and friends is behind on payments from the state,” Mosley attested. “To the right, left, across the street, and behind me.”

By exclusively enrolling private-paying families and forgoing her salary, Mosley managed to retain her two employees, both young mothers. Despite refraining from accepting subsidy children, they continue to cater to families of modest means.

As a result, she no longer relies on state payments for sustenance. Sadly, numerous home-based and center-based providers in the St. Louis region have succumbed to closure due to the payment delays.

Some months ago, when a substantial portion of her clientele comprised subsidy beneficiaries, she facilitated parents’ enrollment in state benefits during the system transition. She vividly recalls parents sharing snapshots of hour-long hold times with state hotlines before being compelled to resume work, unable to secure immediate assistance.

“We view early child care now as our personal crisis,” Mosley articulated.

However, whereas the COVID-19 pandemic saw prompt government and community support for child care providers, Mosley perceives a stark contrast in the current scenario.

Similarly, Luong Nichols in Kansas City has contemplated following Mosley’s path of ceasing to admit subsidize children.

In an email exchange with a staffer from Senator Arthur’s office in April, Luong Nichols bemoaned her plight. System glitches listed two of her subsidy children as private pay, preventing her from documenting attendance. Regrettably, her assistance request remained unanswered.

“I am due to renew the child care subsidy next month and seriously considering not renewing,” she articulated in an email shared with The Independent. “Payments remain incorrect; they owe me for all of February and past corrections. March is about to end and will be added to it.”

After dispatching the email, Luong Nichols entertained an interview offer from a local school district. Ultimately, she declined the offer, unable to part with the children under her care, including foster children, challenging adolescents, and low-income children.

“I have single moms and foster children who have been excluded from other daycares or have gone through numerous placements before seeking my care. The children under my tutelage are like family,” she expressed.

Instead, she invested numerous hours during nap time pleading with anyone available to restore her business. She exhaustively contacted the Missouri Department of Elementary and Secondary Education, the governor’s office, and even the White House.

“I’ve assumed an additional burden just to fight for my rightful entitlement,” she disclosed.

As of the most recent report, she indicates that her payments are current through May. Her perseverance and the assistance rendered by Senator Arthur’s team have been attributed to expediting the payments.

Simultaneously, Luong Nichols has witnessed the closure of three local centers and four private daycares. She places the majority of the blame on the education department.

“DESE has maneuvered the industry to a point of no return,” she criticized. “There won’t be adequate child care providers in Missouri by the year’s end to cater to subsidy children.” She added that the shift would favor private-paying families exclusively.

Hanson from Kids Win Missouri contended that there is presently insufficient data to gauge the child care landscape’s reality.

In response to a query submitted by The Independent last month, the education agency disclosed that they do not track the number of unresolved payment requests.

“In reality, some providers are likely to close shop,” disclosed Hanson. “That’s why we persist in advocating for increased state-level funding to preserve service supply.”