Many families that receive government assistance for child care still pay a lot out-of-pocket. A new Biden administration rule will lower those costs and improve payments to day care providers.(Getty Images)

High quality, affordable child care is essential for kids to learn, parents to work and the economy to prosper. But for years, families have struggled to find and afford care, which can cost more than college tuition, even as the industry’s largely female workforce subsists on extremely low wages.

Recent influxes of federal pandemic funding have eased many of those pressures — but that money is about to run out, leaving the entire child care industry and the families that rely on it at risk.

Fortunately, the state has the money to avert the coming crisis. When lawmakers pass a new two-year budget next year, they can use our record revenues and the billions saved in the state’s so-called rainy day fund to ensure kids keep learning and parents keep working.

If they don’t, we know the catastrophe that’s coming. By one estimate, the more than $1 billion in federal funding that flowed into Kentucky’s child-care industry since 2020 prevented half of our centers from closing and saved nearly 80,000 child care spots.

Already, half of Kentucky’s kids live in a child care desert, an area with no available spots for children who need care or more than three kids per available spot. This has only gotten worse over the past 10 years as Kentucky has lost 1,759 child care providers — a 46% drop. Now, there are 159,000 child care spots for Kentucky’s 316,000 kids ages 0-5.

If they’re fortunate enough to find care, that doesn’t mean they can afford it. Kentucky families pay an average of $7,640 per-year per-child. That’s nearly 14% of the state median income — though likely much higher than the typical income of a family needing child care, as parents of young children are often early in their careers and near the lowest point in the trajectory of their earnings. High-quality centers in the state’s biggest cities can cost upward of $13,000 a year. By comparison, the average tuition for a full year at Eastern Kentucky University at $9,544.

An expensive and inaccessible child-care industry makes life hard on working Kentuckians. Over half of working adults in Kentucky are parents, and over a third of those are parents of young children. When parents are forced out of the workforce because they lack child care, the effects fall largely on mothers.

The workforce participation rate of moms of young kids is 65% compared to 93% for dads of young kids.

This costs Kentucky an estimated $1.2 billion annually in lost economic activity.

Even while child care is too expensive for many Kentucky families, child care workers are severely underpaid, earning an average of $25,770 a year. This apparent contradiction is because centers are rightfully required to maintain low teacher-to-student ratios and maximum class sizes for safety reasons.

But it means that centers are constantly in a tug-of-war between the need to provide adequate compensation for the workforce while not pushing families out with higher tuition. It’s a classic market failure.

This fragile, but essential industry would have collapsed during the pandemic were it not for hundreds of millions of federal dollars that kept doors open at centers across Kentucky. These funds have helped increase subsidies for families with low incomes, kept tuition down, allowed centers to make building improvements, and resulted in necessary raises for child-care workers in a highly competitive job market.

In next year’s budget session, the General Assembly can prevent child care from collapsing by replacing the $300 million in annual funding the federal government has provided in recent years. Otherwise, centers will have to make impossible choices like cutting staff pay, significantly raising tuition, closing classrooms or closing entirely. Child care is the industry that supports all other industries, and the springboard for Kentucky’s children —it’s worth the investment.

The need for additional raises isn’t only about fairly compensating state employees, it’s about addressing a debilitating shortage of these workers. (Getty Images)

Last year, the General Assembly provided the first meaningful raise to workers in state government in 14 years by providing an 8% cost of living adjustment. Though that increase was welcome, and helped keep state employees from feeling the worst inflation in decades, it was not nearly enough to correct a decade and a half of pay stagnation that has played a major role in shrinking the state’s workforce.

Fortunately, lawmakers planned to do more this year by setting aside $200 million for additional raises starting July 2023. As the legislative session draws to a close though, that promise looks as if it will go mostly unfulfilled.?

House Bill 444, which passed the House last week, allocates only $89 million toward a 6% state worker raise, leaving more than half of what they set aside for raises on the table, rather than in workers’ pockets. While any raise is better than none, HB 444 would still leave state workers across all three branches making $3,600 less in real dollars on average than they were making in 2007, the year before routine state raises came to a screeching halt.

If Kentucky is to meaningfully address the state worker shortage that affects vital services we all rely on, the legislature must correct the problem of stagnant worker pay with larger raises and a commitment to making up lost ground over the long haul.

That work began last year when the average executive branch employee’s pay was raised to an inflation-adjusted $50,343, up from $50,145 the year prior, according to data obtained from the Personnel Cabinet. That increase was driven by the 8% across-the-board state worker raise and one-time additional raises provided to two cabinets with significant recruitment and retention difficulties — Health and Family Services and Justice and Public Safety. These cabinets received extra funding to recruit more social workers, case workers and public defenders, and to provide bigger raises for state police. So while the average salary shows a nearly $200 inflation-adjusted raise for state workers last year, that number is greatly influenced by those one-time raises to only two cabinets.

Taken together, state workers in the executive branch were making 7% less on average in 2022 than they were in 2007. That $3,600 decline in buying power means a lot to the people who help children in crisis, defend those who cannot afford an attorney, keep our water and air clean and provide other critical public services. And that doesn’t account for the significantly less generous benefits package current workers receive compared to what was provided in 2011 — chiefly, the elimination of a traditional defined benefit pension plan for new hires starting in 2014. That pension was a key tool in attracting and retaining public employees, whose salaries are less than private sector workers for comparable skills.

The need for additional raises isn’t only about fairly compensating state employees, it’s about addressing a debilitating shortage of these workers. In the executive branch, 30% of authorized, full-time positions are currently vacant, and 33% of all positions are vacant. Understaffing increases the workload on each worker, and can ultimately increase the level of burnout and turnover, which further exacerbates the shortage of state workers. It is a vicious cycle that higher compensation can help address.

To take steps toward addressing this, HB 444 proposes a 6% raise for employees in all three branches, and a $2,000 increase for elected and unelected judicial branch employees (before the 6% increase is calculated). This increase is only enough to keep state employees from falling further behind. Through January, inflation has increased 6.3% in the last year on top of the 7.6% increase the year before, for a two-year increase of 14.4%. A 6% raise would only allow state workers to continue treading water.

The bill sponsor shared last week that more state worker raises may be coming in 2024 once the executive branch provides a study on how to restructure the pay scale. But the problem will persist as long as we let this issue linger.? Our state government workforce provides critical services, and taking care of them is paramount to them taking care of all of us.

Dustin Pugel is the Research Director at the Kentucky Center for Economic Policy (kypolicy.org).