With most of the federal government's pandemic relief money for child care now spent, it's up to states to step in with new ideas to solve the many problems plaguing the sector.

A year ago, Kentucky came up with a creative solution that is already paying dividends.

The state made all child care employees eligible for free child care, regardless of household income.

"That is a beautiful incentive," says Jennifer Washburn, who owns and runs iKids Childhood Enrichment Center in Benton, Ky. "Any of my teachers who have children — they can work for me, and their children are paid for by the state."

Drop in low-income children in child care led to a discovery

The idea emerged after the state saw a sharp drop in the number of children accessing child care subsidies in the pandemic — from roughly 30,000 to just 17,000 children.

Sarah Vanover, who was then director of Kentucky's Division of Child Care, says that remained true even after the state raised the income eligibility threshold, making many more families eligible for subsidized care.

After a flurry of calls to child care centers, Vanover concluded there was no lack of need. In fact, many parents were desperate to get their kids into daycare so they could return to work. They just couldn't find open spots.

One reason was Kentucky had lowered the child-to-teacher ratios in the pandemic to prevent the spread of COVID. Each class had to be smaller.

However, the bigger problem was staffing. Child care centers couldn't find anyone to work.

"They had empty classrooms with no teachers," says Vanover.

Competition for workers a culprit

In the pandemic, competition for workers intensified. The local Target started paying $17 an hour. The starting wage at Domino's was $15 an hour. In Kentucky, child care paid around $12 an hour.

"So when you're thinking like, 'Okay, I can I can work with all these kids in a very labor intensive job and make very little money, or I can go to Target and stock shelves and make $5 an hour more' — it's not a contest for working parents who need to support their family," says Vanover, who's now policy and research director with Kentucky Youth Advocates.

Money well spent

Kentucky made day care free for child care workers through a change in licensing regulations. A year later, the number of children receiving state subsidies for child care has jumped up to 40,000, of whom 3,600 are the children of child care employees, according to Vanover.

It does come at a cost to the state, which pays more than $200 a week in many counties for an infant spot, and less for older children. But already, it seems like money well spent.

Vanover is hearing from child care centers who are overjoyed that they finally are able to fully staff up their operations, allowing them to open up spots for working families.

She's also hearing from other states — 30 to date — interested in what Kentucky has done.

One state away, hopes for a similar change

In neighboring West Virginia, Melissa Colagrosso, owner of A Place to Grow, is hoping her state will take notice and follow suit.

To attract teachers, Colagrosso first offers a discount on child care, and then makes it free after three years of employment — but only for children ages two and up.

The benefit was a big draw for Quartney Settle, who had worked at the center part-time while also pursuing her real passion in social work.

In July, Settle quit her job as a middle school social worker, taking a nearly $10-an-hour pay cut to work full-time at A Place to Grow so that her 4-year-old daughter could attend for free.

"I walked away from my my dream career to work here, which is okay — I still get to work with kids, and I still enjoy that," Settle says.

"But I think it's a decision I shouldn't have had to make."

With competition for workers from Sheetz, Walmart and local elementary schools, which are required to have aides in the younger grades, Colagrosso knows free or discounted child care is one of her only draws. But she struggles to afford it.

"Centers can't afford to give those spots away," she says. "We have waiting lists."

Meanwhile, Settle is still working through regret over leaving her promising career path in the school system. For now, she's focused on the upsides — including getting to see more of her daughter.

"So minor things, like, 'Oh, I scratched my finger!' Sometimes, you just need mom's hug," she says. "It's nice to be able to be here for that."

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