Payment backlog leaves Missouri child care providers desperate, on the brink of closing

The Downtown Children's Center in St. Louis, Missouri, was able to stay open for working families during the pandemic by using federal grants (Rebecca Rivas/Missouri Independent).

This spring, the state of Missouri owed Kimberly Luong Nichols $5,000 in backlogged payments for children at her Kansas City daycare who were part of a state subsidy program.

For four years, she’s operated a licensed daycare inside her home, where she currently serves 10 children. Luong Nichols stopped drawing a salary last summer to pay for improvements to her center and two new hires, expecting to draw down a salary again this year.

When the full subsidy she was owed stopped arriving , she laid off those staff.

And as they’ve done for the past year, her family of six relies solely on her husband’s $53,000 salary.

They’ve given up little luxuries like going out to dinner and buying fancier shampoo. And they’ve given up bigger luxuries, like vacations.

When bill collectors started calling, her husband considered getting a second job. On several occasions, she considered doing away with the daycare entirely. But she didn’t, not wanting to leave the families — many of whom have children with developmental disabilities, or who are in the foster care system — with the stress of searching for a new day care.

Luong Nichols is among thousands of child care providers across Missouri who rely on a state child care subsidy program to keep their daycares afloat.

The subsidy, part of a federal block grant program that is state-administered, helps cover the cost of serving low-income and foster children.

But since late last year, a series of changes created a major headache for many providers and families, as parents were unable to register their children and providers in the most dire circumstances were left without money to pay their staff.

The Missouri Department of Elementary and Secondary Education, which oversees the program, has largely blamed a contracted vendor for the months-long backlogs. The system, which launched in December, is still not fully operational.

“ … There have been a number of unforeseen challenges during the transition, which involves loading family and provider data from the existing state systems into the new (Child Care Data System),” Mallory McGowin, a spokesperson with the department of education said in a statement Wednesday. “The (Office of Childhood) is working hard to mitigate these issues and sincerely apologizes to the child care providers and families affected.”

But similar backlogs plagued the system three years ago, as parents struggled to enroll children and providers had to make serious budget cuts.

The latest problems have forced some daycares to close. Others have shifted from serving vulnerable children who qualify for the state subsidy to only admitting families who can afford to pay on their own.

Many providers, like Luong Nichols, have weeks where they’re barely hanging on.

Payment backlogs not new

In Missouri, child care providers can be registered to get a government stipend for every child on subsidy, meaning they receive a partial amount of tuition directly from families, and then the government covers the rest after care has been provided.

The child care subsidy is a federal program administered by states through the Child Care and Development Block Grant. Families apply for the state to directly pay a child care provider for part of the cost of care.

Only very low-income families qualify in Missouri, along with foster kids and children with special needs. The maximum income a family can make to qualify is 150% of the federal poverty line, or $46,800 for a family of four.

The average cost of full-time, center-based care for an infant in Missouri was $11,059 as of 2022, according to Child Care Aware.

There were about 21,000 children receiving the state subsidy as of November, the last publicly available state data. The program shifted from being administered by Missouri’s Department of Social Services to the education department in December. McGowin said the current number is closer to 23,000 children.

Roughly 1,800 of Missouri’s 2,800 licensed and license-exempt providers, including school districts, are contracted to take children on subsidy, Pam Thomas, assistant commissioner for Missouri’s Office of Childhood, said at a State Board of Education meeting last month.

“We do continue to struggle a bit with our vendor and meeting what our expectations are for an efficient and effective system and making clear what’s needed,” Thomas told the board. “And quite frankly the vendor is not delivering on those results to what I would say are our expectations as a department.”

The vendor contracted to develop and implement the new system for the subsidy program is World Wide Technology, McGowin said, a large technology services provider headquartered in St. Louis.

Board members expressed concerns with how to move forward as Thomas reassured them that her department was working “around the clock” to urge the vendor to fix the bugs in the system, which spans about nine steps between a family’s application for subsidy and payment to the provider.

“We have to be cautious about how many more changes we add into the system right now,” she said. “ … We can bend it, but we certainly can’t break it, and I think we’re on the verge of that right now.”

Yet this isn’t the first time the state’s handling of the subsidy program has caused widespread problems for providers and families.

Emails show months-long backlog of payments to Missouri child care providers

In 2021, the state blamed the COVID-19 pandemic and the rollout of a new system used to track attendance, called KinderConnect, for a backlog of thousands of payments.

In spring 2023, parents reported waiting several months to be approved for the state assistance, leaving them struggling to juggle work and child care.

State Sen. Lauren Arthur, a Democrat from Kansas City, said she was notified of the current spate of issues a few months ago by legislative staff who’d started hearing concerns from constituents.

“It feels like way too much time has passed,” Arthur said. “I suspect that child care providers across the state have already closed as a result of these mistakes and it’s totally unacceptable when already providers are struggling. There are already not enough seats available for children who need them.”

Asked last month if she was looking at alternative vendors ahead of the current multi-million dollar contract running out in December, Thomas, with the education department, said she wasn’t opposed.

However, on Wednesday, McGowin, said the department is not currently planning on finding a new vendor. The subsidy payment issues – 60% of which came from technical issues, according to the state – are expected to be resolved by the end of July.

Missouri pays providers for services after they’re performed, rather than in advance. This, coupled with the fact that providers are paid based on attendance rather than enrollment for children in the subsidy program, makes budgeting nearly impossible for providers who take low-income and foster children.

“We’re really relying on the state and DESE to really prioritize solving these system challenges so providers can be paid quickly,” said Casey Hanson, director of outreach and engagement at the child advocacy nonprofit Kids Win Missouri.

Hanson has spent hundreds of hours with child care providers over the past several years. She knows what’s at stake.

“They’re some of the most resilient people,” she said. “They care about children, they care about the future of our state more than almost anyone.”

‘Our own personal pandemic’

Tina Mosley was among the providers who made the difficult decision to stop taking children on subsidy.

For 28 years, she has owned and operated Our Daycare and Learning Center in St. Louis, which is licensed for 10 children. It sits in the Normandy school district where the median household income is less than $39,000, and more than 56% of students in public school have SNAP benefits, according to 2021 data from the National Center for Education Statistics.

Every other provider she knows in the area accepts children on subsidy. And they’re all in the same predicament.

“Every one of my colleagues and friends, the state is behind on paying them,” Mosley said. “To the right of me, to the left of me, across the street from me, behind me.”

By only taking private paying families, and by ceasing to collect a salary, Mosley said she’s been able to continue employing her two staff, both of whom are young mothers. And while they no longer take children on subsidy, they still service lower income families, she said.

As a result, she’s not left waiting on payments from the state. A handful of home and center-based providers she knows in the St. Louis area already closed because of the lag.

Several months ago, when most of her children were from the subsidy program, she was helping parents sign up for state benefits as the system transitioned over. She recalls parents sharing screenshots of hold times on the phone with the state surpassing an hour before they had to hang up and return to work, unable to get the immediate help they needed.

“Early child care right now, we feel like we’re in our own personal pandemic,” Mosley said.

But unlike during the COVID-19 pandemic, when government bodies and communities showed up in stride to keep child care providers in business, Mosley said it feels like most people have now turned their backs.

Luong Nichols, in Kansas City, has considered doing what Mosley has done: stop opening her services to families on subsidy.

In an April email to a staffer in Arthur’s office, she lamented her situation. The system had two of her kids on subsidy listed as private pay. A glitch wouldn’t let her submit attendance. She hadn’t heard back on her help ticket.

“I am due to renew child care subsidy next month and really considering not doing it,” she wrote in an email she shared with The Independent. “Payments are still not correct, they owe me all of February and past corrections. Now we are about to end March and that will be added.”

After sending this email, Luong Nichols went on to interview at a local school district. She ultimately turned down the job offer, unable to part with the children in her care, including foster children, kids with behavioral difficulties and low-income children.

“I have single moms and foster children that have been kicked out of other daycares or gone through many placements before they landed on my door. And the kids that I take care of, they’re like family.”

Instead she continued to spend hours on the phone during nap time begging anyone to make her business whole again. She called the Missouri Department of Elementary and Secondary Education and the governor’s office. She even called the White House.

“I’ve had to take on an extra load of work just to fight for something that I’m entitled to,” she said.

As of Wednesday, she said her payments were caught up through May. She credited her persistence, and assistance from Arthur’s staff, for speeding up the payment.

At the same time, Luong Nichols has seen three area centers and four private daycares shutter. She directs most of the blame at the department of education.

“DESE has pushed the industry to the point of no return right now,” she said. ”We’re not going to have enough child care providers in the state of Missouri by the end of this year to take care of subsidy children.” She said it will move to private paying families only.

Hanson, with Kids Win Missouri, said there isn’t currently enough data to know the reality of the child care landscape.

In response to a Sunshine request submitted by The Independent last month, the education agency said they do not currently track the number of backlogged payment resolution requests.

“The reality is, yeah, there are providers that will close,” Hanson said. “That’s why we continue to advocate that we need more state level funding in this space to really maintain a supply.”

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