Early morning in the basement level of Heidi Mather’s Colorado Springs house is a scene of controlled chaos. She and a handful of aides wrangle a group of children from infant to preschool aged, who draw, play and babble in all corners of the space. Each child needs constant and individualized attention from the early morning drop-off to a parent’s after-work pickup.

Mather has been a professional care provider in the area for decades, but things may be more difficult for her business now than ever.

“It just seems like the funding is dipping, dipping, dipping,” she said.

As costs increase for Mather due to state facility requirements and business overhead, she must walk a fine line between remaining affordable for her client families and riding out a period of anemic state funding.

Many of her current families cannot afford a rate that would allow her to stay in business, so she opens about half of her slots to the Colorado Child Care Assistance Program, a statewide child care subsidy administered by El Paso County and used by thousands of families. With the program on an enrollment freeze announced in November, Mather is concerned for parents and for her business.

“It keeps getting harder and harder,” she said.

Mather is not alone. Just as the enrollment freeze signals trouble ahead for low-income parents, many in the industry are sounding the alarm about the long-term stability of quality early childhood education and care in El Paso County. Without systemic changes and outside funding, insiders say the state of early childhood education and care in El Paso County may only deteriorate.

“This impacts absolutely everyone,” said Liz Denson, executive director of Early Connections Learning Centers in Colorado Springs.

A cycle of chaos

For a long time now, math for the early childhood industry has not been adding up in the Pikes Peak region.

According to local social services organization Joint Initiatives, El Paso County has about 16,000 fewer slots open for children ages birth to 5 than are needed, a situation that has steadily gotten worse since the COVID-19 pandemic wiped out about 9% of area day care facilities. Rates for child care statewide have steadily increased, with the average cost of infant care now in the tens of thousands each year.

At the same time, remaining providers say they are struggling to make ends meet with high employee turnover and a majority of clientele who cannot pay market rates. For Denson, that means relying more and more each year on charitable donations to keep the doors open for one of El Paso County’s largest and oldest early child care providers.

Early Connections is a nonprofit founded in 1897 in Colorado Springs and has grown to five centers serving over 300 children. About 60% of children receiving care are enrolled in assistance, said Denson, while families who were not eligible for the state subsidy program pay tuition on a sliding scale based on income. Despite government subsidy rates falling well below market, Early Connections makes less money in tuition from private pay clients than those on assistance due to its sliding scale.

“Families can’t afford the true cost of child care,” she said.

For Early Connections, child care assistance dollars and grant funding are how its centers make up the difference between what parents can pay and the actual business costs, including salaries for qualified early education professionals. With an enrollment freeze, the nonprofit must rely on philanthropy for up to about $182,000 in dropped enrollment from children aging out of assistance and not being replaced.

If the indefinite enrollment freeze continues past next year, the century-old center will need to adjust to losses in the hundreds of thousands.

“We’re struggling to keep up,” she said. “We can’t just pass that charge onto parents and can’t pass the charge onto counties and states.”

As a nonprofit, Early Connections is still in a better spot than small business providers like Mathers, who have no other revenue stream to make up the difference in enrollment. While many centers and in-home providers have long waitlists for slots, those may go unfilled without subsidy dollars to pay the tuition that most families cannot afford.

The problems incurred by the freeze are worse in parts of Colorado Springs and the county where the few providers that still exist have been accepting high rates of child care assistance. Kelly Hurtado, the chief operating officer of Joint Initiatives, said that some neighborhoods in southeast Colorado Springs and Fountain have as much as 70% to 90% child care assistance enrollment among children in care.

She said that many providers in those areas struggle to maintain enough revenue to stay in business, contributing to widening geographical gaps in care.

“We kind of see this cycle of chaos that happens in those programs,” she said.

Sandra Black is an in-home provider in Fountain with about half of her families enrolled in assistance. She said that the program, though not generous in its reimbursements, has kept her afloat while also allowing her to provide professional quality care to families who could not otherwise afford it. She said she was among just a handful of providers in the city.

“It’s important to me that these kids get the same chances that private care kids get,” she said.

Checking boxes

The end of child care assistance enrollments is a big blow to the industry, but its impact is hitting a sector struggling under more than just market forces. Some point to burdensome regulations that make it difficult to open and maintain a business, driving an unlicensed shadow industry that undercuts licensed providers.

Regulations on the industry have increased in the past decade, said Hurtado. Some requirements are in response to new research, while others are in response to prior child abuse and neglect cases. Licensing in Colorado Springs is conducted through a state-contracted agency called the Institute for Racial Equity and Excellence, which conducts pre-licensing and drop-in inspections on facilities.

Facility requirements are strict and, in some cases, require major overhead costs for a daycare provider who can expect thin profit margins. As an example, Hurtado said that an in-home care provider may be required to install a new regulation fence around their yard to the tune of about $15,000.

“If you’re a family child care provider, that’s probably not a sum of money that you have to invest in your business,” she said.

State and federal funding for mandated upgrades is available through agencies like Joint Initiatives, but as COVID-19 stimulus funds dry up so, too, has grant money. Mathers said that she applied for and received about $7,500 to install new doors at her in-home facility. She ordered the doors, then the money was revoked.

“They were out of money,” she said. “They pulled the funding and gave me nothing.”

Hurtado said that the funds Joint Initiatives authorized to disburse to providers through the Colorado Department of Early Childhood are just about depleted halfway through the 2024-2025 fiscal year.

“A majority of those funds have already been spoken for,” she said.

While effective regulations help keep children safe and ensure a high quality of care, Denson says some rules can be “hoops to jump through” for smaller providers without the ability to take out a business loan or push through startup costs.

The result? Some providers are choosing not to pursue a license at all, forgoing any government regulation. In Colorado it is legal to care for up to four children including your own without a license. With the lowest tier of child care licensing, that number increases to just six children.

Marie Steier, the director of Purple Mountain Playroom in northeast Colorado, is currently an unlicensed care provider. While she has accreditation and wants to open a licensed center once her paperwork goes through, the process is costly.

“Every time I thought, ‘All right, box is checked,’ three more things popped up,” she said.

In the meantime, she is not struggling to find clients. While Steier stays strictly below the state-mandated amount of children she can have in her care, she has heard of other unlicensed care providers taking on more children than allowed. She said the child care shortage makes families happy to find what they can.

“We need more providers than we have now,” she said.

Unlicensed care is a big worry for providers like Black and Mathers, whose business model is not much different but for costly regulations. Without child care assistance as an option for parents, they are worried families will resort to unlicensed care at lower rates.

“A lot of unlicensed providers undercut even (the child care assistance program),” said Black.

The process for flagging illegal day cares has improved in recent years, but unlicensed care facilities still receive vastly less scrutiny than those operated under a license. The Colorado Department of Early Childhood publicizes unlicensed facilities that have received cease-and-desist letters, often after multiple complaints and an investigation.

“I’ve seen that be really effective,” said Hurtado. “I think that really shakes families up and makes them want to find different care.”

Still, she said it was difficult and “labor intensive” to root out illegal businesses, acknowledging that many of the 16,000 children in need of day care in El Paso County are likely in some form of unlicensed or informal care. Joint Initiative has a program to help care providers in the “friends, family and neighbors” network of unlicensed care providers get access to help and education.

“Those care providers were the least linked to resources,” she said.

While informal care for young children is legal and accepted, cases of abuse can be major. In 2021, a Colorado Springs woman named Carla Marie Faith was found guilty on multiple counts of child abuse after multiple complaints led to the discovery of 26 children in a basement concealed behind a false wall in her home. Faith was up for parole this year, according to Gazette news partner KOAA.

“Oh, my goodness, have we seen what can happen to children when those regulations aren’t put in place?” said Hurtado.

A lot of heart

Across the board, El Paso County providers say funding is what they need to keep going. El Paso County Department of Human Services has blamed the countywide freeze on child care assistance on state legislation increasing the reimbursement rate for providers, as have the six other counties that have put holds on their programs or instituted waitlists in the past year.

Denson said she was concerned that requirements passed on the state and federal level meant to revamp child care assistance may do the opposite without money to back the changes. By 2026, the program will need to pay providers in advance instead of after each month of care, for enrollment rather than attendance, and at a higher overall rate.

Families in the program will also pay no more than 7% of their yearly income through the subsidy, regardless of how many children they have enrolled.

While an effective reform in theory and a needed boost to providers, Denson said that lawmakers were not doing anything so far to prevent the changes from becoming an unfunded mandate.

“That’s just another drain on the pot of money available,” she said.

On the local level, some Colorado counties have taken proactive action in the issue. For example, Summit County voted in 2022 to approve a lodging tax to fund and affordable housing. While no such measure is currently in talks in El Paso County, Denson said she hoped something similar might come on the table.

She said child care, long dominated by women and people of color, has always been an underappreciated and underpaid profession.

“It takes a lot of heart and a lot of passion to work with these little bodies, these little humans,” she said.