At a cost of 50 cents on the dollar, Colorado receives an annual $50 million investment in child care from private donors. But the driver for that investment — the Child Care Contribution Tax Credit — will expire on December 31, 2019 unless the legislature passes a bipartisan sponsored bill to extend the tax credit for five years.
The tax credit encourages this investment by granting a 50 percent tax credit for qualifying donations. In 2016, nearly 22,000 taxpayers donated $50 million to thousands of organizations to establish, build and operate child care centers and youth-serving facilities, to fund grant programs enabling more families to afford child care, and to support professional development for child care and youth sector workers. And to receive that investment, Colorado paid only half that amount through the tax credit.
But unless this investment continues and grows, the economics of child care — for both families and providers — will mean that high-quality, affordable child care will not be available to every Colorado family that needs it.
Demand is high and is only going to get higher. According to recent Census data, 63 percent of children under six live in households where all parents and caregivers are working, and that means they need child care. The Colorado Department of Local Affairs projects that the number of children between birth and 14 will increase by 13 percent between 2016 and 2026.
And the supply of high quality licensed child care slots is not meeting demand. According to a recent study, 46 percent of Colorado’s population lives in “child care deserts,” where demand for licensed child care is at least three times greater than supply. Colorado Shines, Colorado’s child care quality rating and improvement system, awards a high-quality rating to only 19 percent of licensed child care providers.
At the same time, the economics of child care makes increasing the supply of high-quality, affordable care very difficult. Unlike the completely publicly funded K-12 system, child care is primarily funded by parents’ tuition payments.
Paying for the available licensed care is a challenge for most Colorado families. Infant care accounts for nearly 20 percent of median family income, and nearly 50 percent for single parent families.
To the extent that child care receives public funding, it is not nearly enough. Colorado’s child care subsidy program helps only 13 percent of eligible families, and the state’s preschool program covers only a fraction of eligible children.
This combination of high costs for parents and insufficient public funding means that providers have a hard time paying their costs, and that undermines the quality of child care and impedes increasing supply. Many child care providers cannot pay the wages necessary to attract and retain qualified employees.
According to an economic study prepared for Early Milestones Colorado, child care workers earn less than half the average annual income for all Coloradans and preschool teachers fare only slightly better. As reported in the Colorado Early Childhood Workforce Survey 2017, low pay leads preschool teachers to leave their jobs four times more frequently than elementary school teachers, and that turnover rate decreases the quality of child care.
And now, child care providers are worried that private donations will decline because the recent doubling of the federal income tax standard deduction could decrease tax deductible donations.
What are the consequences of parents being unable to afford high-quality child care and providers struggling to pay their costs — let alone expand capacity? For many families, it means fewer child care choices and inability to provide their children with the developmental benefits of high-quality care. Frequently, parents decide to change jobs or leave the workforce, and that has a ripple effect upon employers.
In short, Colorado needs to increase its investment in high-quality child care. Extending the Child Care Contribution Tax Credit to help parents pay tuition and providers increase quality and supply would be a very good start.
David Hammond is a director of Executives Partnering to Invest in Children. Bill Jaeger is vice president of early childhood initiatives for the Colorado Children’s Campaign.
To send a letter to the editor about this article, submit online or check out our guidelines for how to submit by email or mail.