South Dakota parents trying to return to work after pandemic-caused layoffs, furloughs or job changes may have a hard time finding child care as state day care providers struggle to survive amid decreased business and increased costs.

Day care centers, preschools and state registered in-home day care providers were struggling against high costs, slim profit margins and a shortage of workers even before the COVID-19 pandemic.

With more parents now working from home, and fewer jobs available due to a slowed economy, many child care providers find themselves paying for enhanced cleaning measures and extra staff at a time they are serving fewer children and bringing in less revenue.

Industry leaders have begun to worry that without a fully reopened economy and more state and federal support, child care providers will be forced to close permanently, which could reduce the ability of people to go back to work and prolong the COVID-19 economic recession.

“I have heard from other agency directors and CEOs that they are getting to their breaking point,” said Rebecca Wimmer, CEO of the CEO of the Boys and Girls Clubs of the Sioux Empire, which operates after-school and child care programs for working parents. “There’s not a whole lot further that these organizations can stretch. And then at that point, I do believe we will be in a serious predicament in terms of not having the available care for our children.”

South Dakota was struggling to build its workforce well before the pandemic hit and a shortage of child care was part of the problem. Between 2015 and 2019, the number of in-home, family day care providers registered with the Department of Social Services dropped from 689 to 445, a loss of 244 providers and space for up to 2,928 children, according to data gathered by the Kids Count program at the University of South Dakota. In the same time period, just 19 new out-of-home day care centers were added to the market.

As South Dakota tries to claw out of the economic crisis caused by the pandemic, the economic consequences of a lack of child care options could be significant, said Rob Grunewald, an economist with the Minneapolis Federal Reserve Bank. If a state becomes too short on child care, its entire economy can be slowed by people staying out of the workforce to care for their children, which can increase reliance on public assistance and decrease economic productivity.

“Without child care, there’s a sizable portion of the workforce that won’t be able to go back to their jobs,” Grunewald said. “If there is a business looking to expand but the workforce doesn’t have enough child care, it can be harder to find workers.”

While unemployment in South Dakota remained much higher than normal in May at 9.4%, businesses are recalling workers. So far, there have been spaces open in child care programs for the children of returning workers because so many parents were out of work. But those openings will likely be filled quickly, Wimmer said.

In March 2020, Dawn Wall closed her 24-hour, in-home child care operation in Rapid City and took an early retirement after 27 years due to COVID-19. Both she and her husband, who is also retired, are over 60 and are considered to be at higher risk from the potentially deadly disease.

“I didn’t feel that it was worth the risk to stay open,” Wall said. “It’s not fair to families to open up for a short time and then say, ‘Oh by the way, I’m retiring.’”

Many of the children who needed overnight care were the children of single parents who were nurses, certified nursing assistants, nursing home employees and overnight workers in the hospitality industry. Her decision to retire was a blow to some clients who were forced to scramble to find alternate arrangements for their children.

“One client flew a relative into Rapid City to live with them” and help care for the children, Wall said. “Others had to get help from family or work from home.”

Child care is especially important in South Dakota, a state that is near the top in the nation for the number of households in which both parents work one or more jobs.

Exactly what the child care industry in South Dakota will look like once the thousands of out-of-work parents go back to their jobs is unknown, said Janessa Bixel, president of the South Dakota Association for the Education of Young Children.

The costs of providing quality early childhood education or child care include providing staff, supplies, food diapers, baby formula and utilities. But there is only so much a day care provider can charge their clients, who include many young, low-paid workers, Grunewald said.

“Before the pandemic, the business model for child care was one of thin margins and it was a challenging business model to make a profit with,” Grunewald said. “The extra costs, now, to address COVID-19 have created more pressure.”

Child care is one of the biggest items on most family balance sheets. Many parents pay more than $6,000 a year for child care, according to the national nonprofit Committee for Economic Development. For day care providers, setting rates attractive to clients while covering the actual cost of care is difficult, Bixel said.

High costs combined with low rates have made keeping the doors open at many child care centers a challenging prospect. For example, Bixel said, a child care center must have one adult staff member for every five children under the age of three. Even at the highest DSS market rate of $4.20 per hour, a center would only be bringing in about $33.60 per day on each toddler or infant.

In South Dakota, the average child care worker makes about $10.55 an hour, $1.45 more than minimum wage. Subtracting the cost of diapers, formula and food for each of those five kids leaves little left over to pay administrators, invest in new programming or to turn a profit, Bixel said.

Low pay has helped make finding workers difficult, she said, which also was a major problem facing the child care industry prior to the pandemic.

Several day care centers around the state have closed temporarily after employees or children tested positive for COVID-19. In early July, the Leap 2 Learn Educational Childcare in Rapid City closed for two weeks after two employees and a child tested positive for the disease.

So far, most of South Dakota’s child care centers and registered in-home day care providers have been able to stave off permanent closure owing to government financial assistance. Many providers have stayed afloat through financial support from the federal government through the CARES Act.

There also is an entire class of low-cost child care providers, known as unregistered family day cares, that are unregulated and also ineligible for assistance.

South Dakota doesn’t require in-home child care services to be licensed, so virtually anyone with a clean criminal record can start an in-home day care and care for up to 12 children at a time.