PIERRE, S.D. – Lawmakers dedicated to tackling South Dakota child care affordability and sustainability plan to introduce a legislative package this year based on a statewide report released Friday, Jan. 10, 2025, by the South Dakota Early Childhood Task Force.
A lack of affordable and accessible child care — due primarily to unsustainable funding for child care providers — lowers workforce productivity in the state, slows economic growth and costs the state an annual $392 million, according to the report.
The legislative package, which task force leader and Brookings Republican Sen. Tim Reed plans to introduce, includes bills to:
- Provide scholarships for higher education students to pursue early education careers.
- Provide government-subsidized child care assistance at the “true cost of care” rather than the market rate.
- Expand the state’s child care assistance program.
The bills will require state funding, though Reed hasn’t determined an estimate yet. Given a tight budget this year due to lower-than-anticipated state revenues, he anticipates it’ll be a hard sell to lawmakers.
Access to child care allows parents to work instead of leaving the workforce, Reed said, but it also invests in the state’s future.
Research shows early childhood investments improve a child’s potential and provide a return on investment for government spending — as much as $4 to $9 return per $1 invested due to reduced need for special education, welfare support and incarceration in the future.
Kayla Klein, task force leader and CEO of Klein Visioneering Group, said child care reform focused at the local level is ready to go statewide.
“We need to remind ourselves that we are here for the youngest and most vulnerable citizens in South Dakota, which are our children,” Klein said. “They are the future of our state, and their parents and providers need all the support they can get to give the best start to their educational journey and growth.”
Policy recommendations: Improve child care access, affordability & workforce
With more than 50,000 children aged 5 and younger with both parents working in South Dakota, there are 32,670 total licensed child care spaces in the state. That’s a potential child care gap of 35%.
That gap, which grows as child care providers continue to close in the state, is primarily due to the industry’s unsustainable funding model, Klein said. Child care businesses operate on slim to no margins at market rate, according to the task force report and a 2024 cost of care study by the state Department of Social Services.
With thin margins, child care workers have one of the lowest wages in the state at $12.67 an hour on average. Four out of 10 South Dakota early educators quit their jobs in 2021, according to the task force report, and less than 40% of surveyed workers in 2024 said they’re satisfied with pay, according to the department’s workforce study. Fewer workers means fewer child care spaces available or more child care businesses closing.
“We need to be able to pay our child care workforce. If we’re ignoring that — how much we’re able to pay the child care workers — we’re never going to solve the problem of increasing capacity,” Reed said.
But many parents can’t afford to pay more. Infant care at licensed centers costs 10-20% of a median family’s income across the state, according to the report. In-home providers cost 9-12% of a median family’s income. Seven percent of the median family income is considered affordable, the report says, citing the U.S. Department of Health and Human Services.
Where the state can step in, Reed said, is reevaluating how much the state provides families and providers for child care assistance.
The Child Care Assistance Program is a federally funded program for low-income families to pay for child care. South Dakota uses a market rate assessment to reimburse child care providers. But it doesn’t reflect the actual cost of care, according to the report, given that most businesses don’t make enough money to pay their staff salaries comparable to other teaching professions.
“If you’re not able to provide the true cost of care, you’re not going to have capacity,” Reed said. “If you don’t have capacity, you don’t have people working.”
The state spends most of the federal money allocated to the program each year, Reed said, even with just 7% of eligible infants and toddlers receiving the benefit. The state financially supported an average of 2,985 children per month in fiscal year 2024, with an average monthly payment of $892.51 per case, according to the governor’s proposed budget.
An increase in assistance would be on the state’s dime. Reed’s hope is that the increased subsidies would allow child care providers to lower their tuition costs for families who don’t rely on the assistance program.
“It’s only a start,” Reed said. “I think there’s a lot more work to be done.”
Reed also plans to introduce a bill that would expand the state’s child care assistance program to include a parent who exceeds the program’s income limits but works in the child care industry. The proposal aims to mirror a Kentucky program started in 2022. About a dozen states have implemented or are considering implementing similar policies since then.
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A family is currently eligible for the Child Care Assistance Program if they earn less than 209% of the federal poverty level, or less than $54,000 a year for a family of three.
The proposed expansion aims to incentivize parents who leave the workforce to stay with their children at home to take a job as an early childhood worker instead — making child care more affordable for those families, and increasing the workforce needed to stabilize the industry.
Reed hopes creating state-supported scholarships for early childhood education could alleviate workforce concerns as well by drawing more workers into the profession.
Aside from the task force’s planned bills, the report recommends creating “braided funding streams” to supplement child care revenue. That effort should be carried out at the local level because the state “just doesn’t have the funding available,” Reed said.
Some communities are already using braided funding. Rapid City is piloting a tri-share model, where public, business and family partners share a third of child care costs. In Rapid City’s case, the nonprofit John T. Vucurevich Foundation, a plumbing company and the family each pay a third of tuition for 13 children whose families exceed eligibility for child care assistance but can’t afford child care completely.
“All communities,” Reed said, “need to take a look at what they can do for braided funding.”
2024 Child Care Workforce Study
The early childhood task force report released Friday references data from a workforce study completed by the state Department of Social Services in late 2024.
According to the department report:
- 52% of child care center directors reported that hiring staff is difficult; of those who expressed concern, nearly three-fourths cited no or too few applicants and 65% said jobs were turned down due to pay.
- Over 83% of center directors were worried that teachers would quit due to low compensation. About 36% of center staff surveyed said they were satisfied with their pay.
- To deal with staffing challenges, 78% of center directors asked existing staff to work longer hours and 68% said they hired staff with less experience and qualifications. Nearly 72% of directors said they raised wages.
- About 58% of center directors have “turned families away” due to staffing challenges, and 38% have reduced the number of classrooms.
