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Tuesday, Jun 6, 2023

DAY CARE — New Day-Care Centers Going Bust

Demand for affordable day care is exploding throughout Los Angeles, as an increasing number of welfare parents make the transition to work.

And while a government program launched in 1998 to help meet that demand has resulted in more than 1,000 new day-care facilities being opened in L.A. County, the shortage remains acute.

A big part of the problem is that many operators of the new facilities, particularly the smaller operators who use their own homes to care for children, don’t have the crucial skills or training needed to successfully operate a business. The result: about 16 percent of family day-care services in L.A. County are shutting down within six months of opening, and some 30 percent are closing within a year, according to industry officials and a recent survey.

“Many people go into this business thinking they’re going to be very profitable, not recognizing it truly is a business,” said Lisa Nunez, division chief of the Department of Public Social Services for Los Angeles County. “But if you don’t market, train staff and do all those things that help improve quality and keep up all those things that pertain to your business, it won’t happen.”

Kathy Nuno is one of the newly licensed day-care providers having problems. She got her license in April after spending several years working part-time at another center and attending a number of child development classes. But Nuno’s fledgling business has yet to enroll its first child.

“I had an idea (of how long it would take to start up) because I worked in a day-care center before, but there are more things to do than I thought,” said the Sylmar mother and entrepreneur. “It kind of takes time to understand these things and to put these things together for the business part of the day care.”

Nuno is typical of many new day-care operators. She chose to open a center because she likes kids and because the business allows her the flexibility to be home with her own children as well. But there is little in her background to prepare her for many of the tasks involved in running a small business, including hiring, training and supervising workers; managing cash flow and record-keeping; and marketing the service.

Even more established day-care providers face the same daunting dilemma.

“While providers have been in business for several years, many are operating with as much as a 25 percent vacancy rate,” said Nunez. “It is those family day-care homes that maybe aren’t marketing. They need to draw in the families to those homes.”

Easing the burden

When California passed the Welfare-to-Work Act in 1997, officials realized that welfare recipients being turned out into the workforce would place an added burden on the already tight availability of day care. In response, officials included a child-care component to help address the anticipated need.

As part of the program, the County Department of Public Social Services in 1998 received just under $2 million from the state, earmarked for child care. While setting up a child-care training institute and providing funds to existing centers for supplies, the county also provided the local Community Care Licensing Division of the state Department of Social Services with just under $500,000 to expedite the opening of child-care facilities in the area’s neediest communities. (Another $500,000 was allocated in fiscal 1999.)

Using a study that identified 102 zip codes representing most of the city of L.A. along with portions of Pomona, Compton, Pasadena, Long Beach, the Antelope Valley and other areas as those most in need of the services a special section of the licensing division was set up to recruit day-care operators and speed up the processing of their licensing applications.

About 1,000 new day-care centers have opened annually statewide since the so-called CalWorks program began in 1998. The L.A. region alone has succeeded in helping to open 1,269 new facilities in the targeted zip codes, creating 12,583 new day-care slots for children since then.

“Word about the program has gotten out,’ said Angela Bonner, special projects manager for the L.A. region of Community Care Licensing. “We average over 200 applications a month.”

To boost the population of day-care centers still further, the state in April allocated another $10 million to L.A. County for a grant-and-loan program for those who want to open day-care facilities or expand existing ones.

Starting next month, the program will begin providing interest-free grants from $2,500 to $100,000 and low-interest loans ranging from $5,000 to $1.5 million to those who want to open home facilities or centers catering to CalWorks recipients.

“Typically, the child-care community has been denied access through normal funding channels,” Bonner said, explaining that would-be day-care operators usually don’t have the required finances or collateral to qualify for many other loan programs. “If you start advertising that there’s money out there, we’re going to have additional applications.”

Challenging business

But even as these new centers roll out, there has been a growing realization that it will take more than licensing new facilities to help get the service out to the communities that need it most.

In the San Fernando Valley alone, there’s a shortage of 20,000 day-care slots for kids ranging from infants to 2 years old. There’s also an estimated shortfall of 31,000 spots for school-aged children from 6 to 10 years old, according to a recently released report by the Child Care Resource Center, a non-profit organization in Van Nuys that provides day-care service referrals and subsidies for low-income families and training for operators.

Government officials said a comprehensive study is now underway to determine day-care needs throughout the county.

The report by the Child Care Resource Center found no shortage of day-care slots for kids between the ages of 3 and 6. But that’s mainly because tallies for that age group included Head Start centers, which only provide care for three hours a day and are therefore not fully meeting the needs of many parents.

“There are definitely more child-care spaces available now than there were three and four years ago, but we also have this turnover issue (with new day-care centers shutting down after only a few months),” said Laura Escobedo, associate director of community relations for the Child Care Resource Center. “So what’s hard to tell is, are we just keeping pace with where we were three or four years ago?”

In some cases, operators are enticed by the opportunity to run their own business, but once in operation, they determine they’re not cut out to deal with children 10 hours a day.

“You have to know yourself and have patience,” said Loretta Weatherspoon, who has run her San Fernando Valley-based home day-care center for 16 years. “This is not a business you get into just for the money.”

Learning the ropes

Those who do get into the business because they like kids often find they are ill equipped to handle the day-to-day business needs that a center, even if it is run in the home, demands.

In addition to marketing, bookkeeping and administrative skills, day-care operators also need specialized expertise in first aid, child development and parent relations.

Day-care services that cater to welfare-to-work recipients can be even more demanding because, unlike traditional centers, where parents are typically required to pay monthly for the service, payment for these recipients comes through the government.

“There are bureaucracy and cash-flow problems with that,” said Escobedo. “They have to deal with not getting their payments sometimes for several months, and that’s particularly difficult for home-based providers.”

Unable to keep up with the demands of running the business, many of the operators fold after a year or less, agency officials said. One hope to make things better is the grant-and-loan program. It will require applicants to complete a comprehensive business plan that should help zero-in on areas where further training is required. Additional resources could then be provided down the road to fill those gaps.

“The retention rate is something we’re concerned about, and the quality of the care is certainly something we’re concerned about… We now have to address it,” said Nunez.

Meanwhile, many new providers like Kathy Nuno are working with mentors provided by the DPSS and relying on their own problem-solving abilities to manage the business end. Nuno has distributed fliers at her church and her son’s school, as well as at her husband’s workplace, and she has received two inquiries so far.

“I’m hoping that by September, when school starts, that maybe I’ll get some children,” she said.

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