CAS 2012 Research Brief #4 Financial Distress Among Child Care Centers in Chicago West and North Side ZIP Codes

Introduction the 2012 Chicago Area Study surveyed 229 center directors in 33 ZIP Codes on the West and North sides of Chicago. All centers and preschools that served three and four year olds in these ZIP Codes were eligible, except those located in the public schools. Eligible settings included preschools in churches, private schools, and community organizations as well as preschool programs and full-day care in standalone child-care centers. Fully 70% of eligible directors participated in the study. For simplicity, we refer to all participants as “centers.” We prepared a set of initial research briefs to disseminate basic study findings. Each of these briefs describes a set of data collected in the survey for the sample as a whole and across five types of ZIP Codes. The five ZIP Code types allow us to provide a basic portrait of differences in center characteristics depending on the raceethnicity and income of the community. The five types of ZIP Codes are: (1) mixed race, low income, (2) majority non-Hispanic Black, low income, (3) majority Hispanic, low income, (4) majority non-Hispanic White, middle-income, and (5) majority non-Hispanic White, high income. The cutoffs between low/middle and between middle/high incomes are $48,500 and $70,000 respectively (about two and three times the federal poverty line for a family of four in 2011). We define a location as being a majority of one race-ethnicity if the ZIP Code is comprised of at least 50% of that racial/ethnic group (see CAS 2012 Research Brief #1 for additional details). This CAS 2012 Research Brief #4 summarizes directors’ responses to questions about their experiences with financial distress, including budget adequacy, worries about paying for space and staff, turnover of teachers and classrooms, raising center rates, and conditions of space and materials. The tables at the end of this document present means and proportions for the variables (tables of supplementary information, including statistical tests, are available from the study investigators). Here we highlight some of the major results.

This research brief provides a basic description of childcare centers’ experiences with financial distress. The clear pattern we find of greater distress in the areas of more concentrated poverty is not surprising. Yet, our results put numbers on the extent of distress, documenting the strikingly high levels in the poorest areas, especially those with majority Black populations, and the extent to which even centers in somewhat better off areas are not free from financial struggles. Figure 1 summarizes these results. In the figure, we show the progression of increasing distress from the most to least affluent areas. The fact that majority Black, low-income areas often stand out with noticeably higher levels of distress is clear, with most centers in these areas reporting worries about making rent and payroll, out-of-date and worn materials, and insufficient budgets (white bars in Figure 1). Centers in majority White, high-income areas also stand out as having the least distress; even though nearly half of directors in these areas reported that their budgets were not large enough, relatively few reported worries about payroll or mortgages or worn and out-of-date materials (black bars in Figure 1). Interestingly, even though the left-most set of bars in Figure 1 shows that reports of budget inadequacies increased in a step-like fashion, the middle sets of bars show that director reports of specific worries about rent and payroll were more clustered together across the three remaining areas (low-income of mixed race or majority Hispanic; middle-income, majority White). Directors in middle-income, majority White areas were particularly likely to report worn and out-of-date materials. This finding may reflect the fact that centers in middle-income areas are often squeezed in the middle of the childcare market – with local families having incomes that exceed the ceiling for subsidies but are too low to cover the full cost of care. This result may also reflect a tradition of non-profit cooperatives supporting preschools in middle-income communities. Future briefs, papers, and reports will explore these possibilities. Elsewhere, we showed that centers in lower-income areas, especially low-income, majority Black ZIP Codes, relied heavily on public assistance programs (see CAS 2012 Research Brief #3). This very high reliance on public programs suggests that these centers are particularly vulnerable to the payment delays associated with state and federal fiscal crises. Although we found that such delays were common across all types of ZIP Codes, centers in low-income, majority Black ZIP Codes may be least likely to have the margin to absorb such financial shortfalls, given all relied on some type of public assistance (and many relied on several types of programs). Another striking finding in the current brief is that even though financial distress was greatest in lower-income areas, centers in high-income areas were most likely to have raised tuition in the prior year. We highlight this result in Figure 2, showing that over six in ten centers in the most affluent areas had raised their rates in contrast to just two in ten in areas concentrated by low-income Black families. We showed elsewhere that centers in areas of concentrated poverty relied less on privately paid tuition (see CAS 2012 Research Brief #2); and, it may be that directors in these areas recognize that parents in their community who pay out of pocket are themselves living on the margins and may be unable to pay more. In future reports, we plan to delve deeper into these topics of the ways in which the recession affected income from public and private sources and how centers have dealt with shortfalls.